There may come a time in a borrower’s life when he is unable to make mortgage payments anymore. If the person who is facing foreclosure doesn’t do anything to remedy the situation, he or she will have to give up their home. Having financial difficulties and not affording to pay for your home anymore is very stressful, and there are a lot of people out there who would take advantage of your situation.
Borrowers who have started to miss payments on their mortgage have the chance to get back on their feet and continue to make regular payments through a mortgage loan modification. Unfortunately, fraud in mortgage loan modification is very widespread, and it is easy for people to become the victims of this practice.
Understanding Mortgage Loan Modification Fraud
Mortgage loan modification companies buy borrower payment history info from credit bureaus, and use this information to find potential customers. Loan modification companies will then contact borrowers who are facing foreclosure by phone, mail, or even by showing up at their door. All mailings and solicitations from mortgage loan modification companies will look and sound official. The company’s name may even sound like it is affiliated with the government or like it belongs to a law firm, but usually these are only tactics of getting you to call the company and, more importantly, see them as trustworthy.
Someone from the loan modification company will tell you that he or she will negotiate with your lender to modify your mortgage loan, and give you all kinds of verbal guarantees. They will, often times, say anything in order to get you to do business with them. You will probably hear about the thousands of home owners that they have helped, that their company is attorney-backed, or that they will give you your money back if your lender doesn’t agree to a loan modification. They can go as far as recommend you to stop talking to your lender and let them handle negotiations, or even advise you to pay their fee instead of using that money to make a mortgage payment.
Another way in which people who are dealing with financial difficulties are preyed upon by scammers is through a new loan scam. The borrower is offered temporary financing that will get them through the hard times, until a more permanent form of financing is arranged. This is done with the condition that the home owner signs over the ownership to his home to the scammer.
Usually, all these scammers do is get as much money as they can from you upfront, while keeping you in the dark about what is happening, after which they simply disappear, leaving you in a much worse situation than you were before.
How to Avoid Fraud in Mortgage Loan Modification
Avoiding getting scammed by people who try to take advantage of you when you are most vulnerable financially is fairly easy if you just keep your calm and use a bit of common sense. Here’s how you can protect yourself and your home form fraud in mortgage loan modification:
- Don’t trust any exaggerated claims and guarantees. Mortgage loan modification companies that claim that they have a near 100 percent success rate, or that they guarantee to get your lender to agree to a loan modification, are most likely telling you what you want to hear in order to get you to hire them. Checking your local Better Business Bureau or other such organization won’t guarantee that you are hiring a good loan modification company, but it will, at least, ensure that you won’t be getting scammed.
- Don’t pay fees upfront. In many states, there are laws that prohibit mortgage loan modification companies from charging you upfront. Even if your state doesn’t have such a law, beware of companies who charge you large fees upfront, especially if the company is fairly unknown.
- Pay your mortgage instead of the loan modification company. Some companies may advise you to pay them instead of your lender. This is something that you should avoid because you will probably end up in an even worse financial situation than before.
- Contact the lender yourself. Don’t allow mortgage loan modification companies to sever the ties between you and your lender. Negotiating a mortgage loan modification is a relatively easy process, which can easily be done by yourself. Also, don’t ignore your lender’s calls and letters, because this may be the difference between getting approved for a loan modification and going into foreclosure.
Fraud in mortgage loan modification is very common, especially in times when more and more people are having trouble paying mortgages. If you don’t have the time to handle this yourself, or think that you don’t have the necessary knowledge, then hiring someone to help you with your loan modification is a logical step. But before you seek the help of a mortgage loan modification company, make sure that they are legitimate, and won’t cause you to end up in an even worse situation than you were in initially.