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Anyone can be scammed if they don’t know the warning signs to look for. Here are six red flags to indicate that you may be dealing with a loan modification scammer:
A company/person asks for a fee in advance to work with your lender to modify, refinance of reinstate your mortgage. It is illegal for a company/individual to charge fees in advance for these services according to the Federal Trade Commission (FTC) Mortgage Assistance Relief Service (MARS) Rule. Note: Attorneys are allowed to charge fees in advance if they meet certain requirements and place fees in a client trust account ( FTC MARS Rule Compliance Guide for attorneys). But be careful! Attorneys, and people claiming to be attorneys, have been known to take advantage of homeowners, too.
A company/person guarantees they can stop a foreclosure or get your loan modified. Nobody can make this guarantee to stop a foreclosure or modify your loan. Many scammers offer “money-back” guarantees to make homeowners feel more comfortable. But why do you need a money-back guarantee when getting a loan modification is supposed to be free? Legitimate, trustworthy HUD-approved counseling agencies will only promise they will try their very best to help you.
A company/person advises you to stop paying your mortgage company or to pay them instead. Despite what a scammer will tell you, you should never stop paying your mortgage to improve your chances of getting a loan modification. Also, never send a mortgage payment to anyone other than your mortgage lender. As soon as you have trouble paying your mortgage, contact your mortgage lender and ask for the loss mitigation department. You should also contact a HUD-approved counseling agency for assistance. It’s free.
A company pressures you to sign over the deed to your home or sign any paperwork that you haven’t had a chance to read, and you don’t fully understand. Be careful. Signing over the deed to your home may not prevent foreclosure. You are still responsible for paying your mortgage even if you sign over the deed to your home. A legitimate housing counselor would never pressure you to sign a document before you had a chance to read and understand it.
A company claims to offer “government-approved” or “official government” loan modifications. They may be scam artists posing as legitimate organizations approved by, or affiliated with, the government. Contact your mortgage lender first. Your lender can tell you whether you qualify for any government programs to prevent foreclosure. You can also work with a local HUD-approved counseling agency to determine what programs you may be eligible for. And, remember, you do not have to pay to benefit from government-backed loan modification programs.
A company/person you don’t know asks you to release personal financial information online or over the phone. You should only give this type of information to companies that you know and trust, like your mortgage lender or a HUD-approved counseling agency.
The best way to spot a scammer is to know the signs of a loan scam - not focus on titles. In some cases, even trusted professionals like real estate agents or attorneys have been involved in loan modification scams.
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