Last month, Federal Trade Commission (FTC) filed a lawsuit against a Florida-based company, which had victimized more than 3,100 homeowners nationwide with their loan modification programs. The firm has been shut down for now and they have even agreed to pay off $4.1 million judgment. Also, they have agreed to work under the close monitoring by federal officials in future. Such loan modification scams have become popular these days as large number of borrowers are looking forward to modify their loans in order to save their houses. So, what are the signs one should watch out for in order to avoid these scams? Just have a look:
- Guarantee of loan modification: No company can guarantee you a success in preventing foreclosure as it would be totally the discretion of the lender whether or not he would consider your request. So, if a loan modification company guarantees you a success in preventing foreclosure without considering your financial situation or mortgage details, chances are that it might be a scam.
- Upfront fees: Check out for the upfront fees charged by the lender. Though, not all fees are illegal, still it's better to not pay anyone who's not a licensed law firm or attorney. There may be some loan modification companies who can charge you upfront fees without even explaining the program details. Avoid dealing with such companies as they could be scam artists.
- Inside connections: Does your mortgage modification company say that they have inside connections and would make payments to the lender on behalf of you? If so, please beware of that company. Such companies would ask you to send your monthly checks not to your lender but to them. This can mean that they would cash as many checks as possible, pocket the money and leave you to face foreclosure.
- Promise rates and terms: No loan modification company can promise you certain terms or rates for your modification. If your mortgage modification company says so, they could be a scam. It is your lender who would decide the type of rates and terms you would get depending upon your situation. A modification company cannot tell you about the rates and terms of modification upfront.
- Rating with BBB: Most of the companies will have a rating with Better Business Bureau (BBB) if they are in business for the past 1 year. If you do not find your mortgage modification company's rating on BBB, be careful enough while dealing with them. However, do not stop your research there. If you are dealing with an attorney, check his/her background with the bar association as well.
In my opinion, it's always better to deal with your lender directly. Write a hardship letter to your lender and apply for a loan modification. If you're unable to negotiate with your lender, then you should think about taking the help of an attorney or any loan modification company.