Beware Loan Modification Scams

Loan modification companies are sprouting up left and right to take advantage of embattled home owners at risk of foreclosure. If this includes you; watch out. Some loan modification companies are nothing but down and dirty scams.

Legitimate loan modification companies will approach your lender and help you complete the necessary steps to adjust your home loan to help you avoid foreclosure. The best loan modification companies will not charge you until they have found a solution for your loan. There are, however, many loan modification companies that will charge you a fee up front. They collect this fee of several hundred or more than $1,000 even if they can’t help you. (For example, if your mortgage bank refuses to negotiate your loan, or you do not qualify for some other reason).

True loan modification scams

While some companies may provide a legitimate loan modification practice but collect fees unfairly, there are some loan modification scams that provide no service whatsoever. These scammers prey on at-risk homeowners’ fear and desperation as they face foreclosure, and make high pressure sales pitches to trick homeowners into paying hundreds or thousands of dollars for the chance to qualify for loan modification.

Unfortunately, since these companies don’t actually provide a loan modification service, nobody will actually “qualify” for loan modification. They collect the money, tell you “sorry you don’t qualify”, and disappear.

What you can do

If you’re facing foreclosure or suspect you may not be able to afford your mortgage, the absolute best thing you can do is to contact your mortgage lender immediately and let them know. Call them on the phone, and then send a letter via certified or registered mail to follow up on what you discussed. Keep a copy. It takes persistence, but as lenders face today’s trying economic times, most should be willing to work out a deal with you–and you may not need to pay somebody to help you.

If you find your lender unwilling to work with you, it’s time to consult an attorney. Preferably before there is any mention of foreclosure. If you suspect a loan modification scam, contact your state’s Attorney General’s office immediately.

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