Mortgage Loan Modification Scams on the Rise
The mortgage crisis has sent millions of homeowners in search of ways to modify their mortgage obligations. Unfortunately, it has also provided a breeding ground for companies bilking distressed homeowners for thousands of dollars in fees for services often available for free. Worse yet, many scam artists simply disappear after collecting their upfront fees from homeowners desperate to prevent foreclosure.
As recently reported by the Washington Post, the mortgage meltdown has given birth to an explosion of companies charging thousands for loan modification services that non-profits offer for free. Federal law does not prohibit companies charging for loan modification services. Instead, patchwork state and local laws govern the practice. Many states require companies offering loan modification services to have licenses. In at least one state (Maryland), companies are forbidden from collecting upfront fees for loan modification services.
Paying thousands up-front for services available for free obviously kicks hurting homeowners while they are down. Less obvious are the implications of time lost if the loan modification service never arrives. The lowest form of mortgage modification scam artist simply disappears after receiving his upfront fee. While the homeowner waits for promised assistance, delinquency notices keep coming. Worse yet, the value of the home continues to plummet while the homeowner waits.
These hucksters prevent distressed homeowners from seeking help where they actually might find it. Hope for homeowners seeking to prevent foreclosure most readily comes either through direct and early contact with the lender or through non-profit services that help homeowners negotiate with their lenders. The U.S. Department of Housing and Urban Development currently sponsors over 2,300 non-profit certified housing counseling agencies around the country.
- If You Are Behind on Your Mortgage Payments (FindLaw)
- Mortgages & Foreclosures Basics (provided by Rowe Law Firm)
- Federal Trade Commission Warning on Foreclosure Rescue Scams
- New Jersey Department of Banking Warning on Mortgage Modification Services
- Washington State Department of Financial Institutions Warning on Mortgage Modification Services
- Maryland Advisory Against Upfront Fees for Loan Modification Services