Avoiding Mortgage Modification Scams

Hello, and welcome to Your Money 2.0. I’m
Thomas Fox, Community Outreach Director of Cambridge Credit Counseling. Since the Great
Recession began in 2007, nearly 6 million families have faced foreclosure proceedings.
In an effort to stem that tide, many independent mortgage servicers and the federal government
have developed a variety of loan modification programs. A loan modification may involve
a reduction in a homeowner’s interest rate, an extension of loan terms, a different type
of loan, or any combination of these remedies. Understandably, people facing foreclosure
eagerly seek the relief these programs can provide, especially if it means they can avoid
losing their home. Unfortunately, the marketplace is ripe with scam artists poised to take advantage
of vulnerable, and often desperate, homeowners. If you’re worried about foreclosure, or
are interested in modifying the terms of your existing mortgage, there are safe and reliable
agencies that can help you understand your options. Foreclosure prevention counseling is available
free of charge through local organizations approved by the U.S. Department of Housing
and Urban Development, or “HUD,” which has certified hundreds of housing counseling
agencies across the country. HUD-approved agencies are not permitted to charge consumers
for their foreclosure prevention services, but rest assured, this is not a case of “you
get what you pay for.” The preparation and training to become certified as a Foreclosure
Default Counselor is a rigorous process. Those counselors who pass their certification exams
aren’t sales people – they’re obligated to provide you with unbiased assistance and
advice. They won’t recommend a particular lender or force you to choose one option over
another. They’re available to help you understand those options. You make the decisions. So, what do you need to be on the lookout
for? Guarantees, for one thing. A reputable counselor won’t guarantee that they can
stop the foreclosure process, regardless of your circumstances. Working with a legitimate
counselor can certainly increase your chances of keeping your home, but be wary of anyone
who guarantees results. One of the more popular scams these days is
the Rent-to-Own or Lease-back scheme, in which homeowners are convinced to sign over ownership
of their property, at which point they’ll be allowed to remain as a renter at a more
comfortable rate. When their finances improve, according to this popular fraud, they’ll
be able to buy back their home. As you might suspect, the scam artist has no intention
of allowing the homeowner to re-purchase the property. Typically, after a few months of
lower monthly payments, the new “landlord” raises the rent, knowing that the tenant won’t
be able to afford the higher payments. After the tenant misses several of the inflated
payments, they’ll be evicted, and the scam artist will legally own the property. Some other scammers claim to be affiliates
of, or approved by, the government. To make their ruse seem legitimate, these folks use
well-crafted websites and marketing materials containing terms such as “federal,” “TARP,”
or other recognizable phrases and acronyms associated with actual government programs.
Typically, these scammers will ask for large up-front fees to help the homeowner avoid
foreclosure, relying on the fact that desperate people rarely pause to read the fine print
in a service contract. Sadly, of course, these companies provide no real service, leaving
desperate homeowners at the mercy of their loan servicer. If you suspect that you’re the victim of
one of these schemes, you should immediately contact the office of the attorney general
in your state. If you’re facing foreclosure, there are
a few steps you can take to protect yourself from loan modification scams. First, contact
your lender or servicer when you fall behind on your payments. You’ll want to communicate
with their loss mitigation department to identify the specific alternatives to foreclosure that
they offer. Also, be sure to make all of your mortgage payments directly to your lender
or servicer. Finally, when considering loan modification alternatives, you have to know
what you’re signing. If you find the agreement too complex, contact a HUD-certified housing
counselor or attorney to review the forms with you. Although you don’t need a third
party to work with your lender, the assistance of a HUD-certified counselor can be very helpful.
The circumstances surrounding foreclosure are particularly stressful, and having a skilled
representative on your side can be comforting. To learn more about mortgage modification
programs, go to makinghomeaffordable.gov or call a HUD-certified housing agency. You can
find a list of approved housing counseling agencies in each state on HUD’s website,
www.hud.gov. Well, that’s it for this edition. As always,
we welcome your feedback and ask for your thoughts and suggestions by e-mailing us at
[email protected] Thank you for watching. Until next time, I’m Thomas
Fox for Cambridge Credit Counseling.

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