Watch Out for Fraudulent Mortgage Loan Modification Services

Motivational speaker Tony Robbins once said, “In life, you need either inspiration or desperation.” Unfortunately, in this era of mortgage loan scams, desperate con men are being inspired to peddle fraudulent mortgage loan modification services, and causing trouble for struggling homeowners who are doing everything in their power to avoid foreclosure. Even though Congress has passed legislation that bans the collection of upfront fees for promised loan modifications, the practice still goes on—and the consequences are sometimes disastrous for homeowners already struggling to make ends meet.

Warning signs of loan modification scams

Fraudulent loan modifiers may contact you through phone calls or mailers. Some even have the nerve to make personal visits. You may also inadvertently reach out to a scammer if you’re engaged in routine online research for solutions to avoid foreclosure. It’s sometimes tough to differentiate a fraudulent service provider from a reputable attorney or non-profit assistance program. The most effective way to make this determination is to keep your eyes open for the following red flags:

• Promises, promises. Be leery of anyone who guarantees that your loan will definitely be altered. Loan modifications are decided on a case-by-case basis, and there are never any guarantees that yours will be decided in the positive. 


• Upfront fees. As noted above, it’s illegal for a business or individual to collect upfront money for loan modification services. If you question the scammer about the legality of the fees, he may say the money is for something else. Don’t buy it. The only service provider that can charge you upfront in this situation is a licensed attorney who is representing you in a bankruptcy proceeding. 


• You’ll get your money back. Yeah, right. Don’t get tricked into paying upfront by the promise of a money-back guarantee. The only guarantee you’ll find is that the scammer’s phone number will be disconnected before you realize that your mortgage isn’t being changed.

• Uncle Sam sent me. Some organizations or individuals may try to win your trust by claiming that they are affiliated with government agencies and programs, such as Obama’s Making Home Affordable. The government has no affiliation with for-profit loan modifiers that charge upfront fees.

• I’ll take ownership, you take the loss. The scariest red flag is any proposal involving an ownership transfer of your home. These proposals might involve transferring the home to someone with better credit, and then establishing a rent-to-own agreement with you. No matter how logical this might sound, it’s a scam. If you fall for it, you’ll end up losing your home anyway.

You’ve worked hard to stay in your home this long, and you don’t want to lose it to foreclosure. Don’t let a fraudulent service provider worsen an already stressful situation. Contact your lender, and visit MakingHomeAffordable.gov to learn more about real solutions for your troubled mortgage. It’s time to get inspired and channel any desperation you feel about making mortgage payments into motivation to take action.