Beware of loan-modification scammers

Posted: July 11, 2014

SOME GOOD THINGS are going on in the economy these days.

Just like temperatures across the country, the stock market has been hot lately. The economy added 288,000 jobs in June. Unemployment dropped to 6.1 percent.

Yet plenty of Americans still need financial help, especially with mortgages. We can't lose sight of these people, because they are vulnerable to predators peddling loan-modification fixes.

Barbara Floyd Jones, senior manager of national homeownership programs at NeighborWorks America, said loan-modification scams are on the rise. And they often work because people don't know much about the loan-modification process.

Floyd Jones took to the streets to see what people knew about mortgage modifications. She asked people how much they'd be willing to pay to have their mortgage changed to give them a financial break.

One person said he would be willing to pay $10,000 to $20,000.

"I don't even know if I would have the money to actually do a loan modification," another man said.

One woman said she would be willing to pay "whatever it would take to keep my home, especially if I'm in foreclosure."

But this is what they didn't know: It is illegal for a company to collect up-front fees for mortgage-relief services.

Under the Federal Trade Commission's Mortgage Assistance Relief Services rule, companies pitching mortgage-foreclosure-rescue and loan-modification services are prohibited from collecting fees until they provide a written offer from a lender or servicer that the consumer decides is acceptable. Homeowners also must be given a document from the lender or servicer describing the key changes to the mortgage if they accepted the offer.

"Despite all that we are doing, people still think they need to pay to get a loan modification," Floyd Jones said.

People are willing to pay because of persuasive radio and TV ads. The companies are taking advantage of the fact that many homeowners still are not getting relief through federal and state programs created to speed up loan refinances and modifications.

NeighborWorks America recently warned homeowners to avoid paying for a loan modification or to stop a foreclosure. More than $93.6 million has gone to loan-modification scammers, according to data collected by the Loan Modification Scam Prevention Network, which includes NeighborWorks America and a coalition of government agencies, nonprofits and service providers. The average loss was $3,287.

Last month, the Obama administration announced it would extend its Making Home Affordable program through 2016. The announcement likely will resurrect some loan-modification scams, according to Douglas Robinson, a spokesman for NeighborWorks America.

"We always see a ramp-up of activity following a government-program announcement," he said.

Here are some signs that you are about to be scammed, according to NeighborWorks America:

* You are asked to pay a fee in advance to modify, refinance or work out issues with your mortgage.

* You are given a guarantee that the company can stop a foreclosure or get your loan modified.

* You are told to stop making your mortgage payments, or you are told to instead send the money to the company.

Learn more about mortgage-relief scams at LoanScamAlert.org. Or go to ftc.gov and search for information about "Mortgage Relief Scams."

Don't get scammed. Help is out there that doesn't cost you a penny.

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