5 Common Mortgage Modification Scams

The recession has put many families in financial peril, making it easier for scam artists looking to take advantage of those in financial trouble who are seeking a way out. Scammers often target homeowners who are struggling to meet their mortgage commitment or are anxious to sell their homes. They make promises they cannot keep, such as guarantees to “save” your home or lower your mortgage, oftentimes for a fee.

Just recently, a client of ours received an email from a scam artist posing as Quicken Loans. The scam offered a loan modification for $750 (it’s illegal to charge for the loan modification process).  In this case, the scammer pretended to have direct contact with the mortgage lender when they did not.

The only way to truly protect yourself from falling victim to a scam is to learn about common scams and what you can do to avoid them. Here are ways to spot the most common scams.

  1. Phony Counseling or Foreclosure Rescue Scams:This scam artist poses as a counselor and tells you he can negotiate a deal with your lender to save your house—if you pay him a fee first. Beware of anyone who asks you to pay a fee in exchange for a counseling service or modification of a delinquent loan. It’s against the law for companies to charge for loan modification assistance.
  2. Fake “Government” Modification Programs: Some scammers may claim to offer “government approved” or “official government” loan modifications, and they may ask you to pay high, up-front fees to qualify for these programs. The scammer’s company name and website may sound like a real government agency. Make sure to contact your mortgage lender first if you have any questions, as they can tell you whether you qualify for any government programs to prevent foreclosure.
  3. Bait-and-Switch: This scam artist tries to convince you to sign documents for a “new loan modification” that will make your existing mortgage current. This is a trick. You actually just signed documents that surrender the title of your house to the scam artist in exchange for a “rescue” loan. Remember, do not sign over the deed to your property to any organization or individual unless you are working directly with your mortgage company to forgive your debt.
  4. Rent-to-Own or Leaseback Scheme: A scammer urges you to surrender the title of your home as part of a deal that will let you stay in your home as a renter and then buy it back in a few years. He may tell you that surrendering the title will permit a borrower with a better credit rating to get new financing—and keep you from losing your home. However, the scammer may have no intention of ever selling the home back to you. Remember, never trust a person who pressures you to sign papers immediately.
  5. Bankruptcy to Avoid Foreclosure: This scammer may promise to negotiate with your lender or get refinancing on your behalf if you pay a fee up front. Instead of contacting your lender or refinancing your loan, he pockets the fee and files a bankruptcy case in your name—sometimes without your knowledge.Beware of a company or person you don’t know that asks you to release personal financial information online or over the phone. This information should be reserved strictly for your mortgage lender or a HUD-approved counseling agency.

If you require financial assistance, the Federal government provides free resources to get you the help you need. Homeowners can call the Homeowner’s HOPE™ Hotline at 1-888-995-HOPE (4673) for information about the Making Home Affordable Program and to speak with a HUD-approved housing counselor. Also, make sure to check out www.loanscamalert.org for more information on protecting yourself from scammers.

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2 Responses to 5 Common Mortgage Modification Scams

  1. Jerry johnson October 7, 2010 at 11:22 am #

    Do you require an “up front ” home assessment fee prior to strating the process to refinance a home?

  2. Amber Hunt October 7, 2010 at 3:02 pm #

    Hi Jerry -

    We don’t require a home assessment fee but we do require an initial deposit. We take this at the time of application and it is credited back to you at closing. Our clients are not responsible for any of the up front costs prior to closing outside of the initial deposit.

    If you want to read more about our deposit, go here: https://www.quickenloans.com/about/quicken-loans-deposit

    Thanks for reading!

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