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How to Avoid Loan Modification Scams While Facing Foreclosure

Updated on June 28, 2013
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Don't Fall Prey To Loan Scams

After the real estate crisis of 2008, the number of home foreclosures began hitting records never seen before. Foreclosure rates have eased just a little bit lately, but for a variety of reasons there are signs this may be the calm before the storm. Record numbers of foreclosures are being finalized each month all across the country and the economy and housing market has a long way to go before settling down.

Sadly, no one wins when a home is foreclosed upon. A family is devastated by losing their home, but most people fail to realize that the lender is not helped by the process either. Lenders lose a lot of money every time they have to foreclose on a home. In addition, foreclosures push real estate values in an area down, thus resulting in even more foreclosures! In addition, cities and towns all across the country are facing declining property tax revenues and increased crime.

Loan modifications could prevent much of this devastation. Unfortunately, this type of problem always brings out the criminals among us who hope to make a profit out of someone else’s dire predicament. Here are some tips to help avoid getting ripped off by loan modification scams.

Tip Number 1: Don’t ever pay anyone in advance to help you apply for a loan modification.

Most of the scam loan modification companies hire the same loan officers who made a living pushing subprime mortgages in the first place. They only cared about their own paychecks in the first place and they haven’t become more caring now. In addition, they are usually just high pressure salesmen who never really understood the financing process in the first place and don’t know how to help you now. Luckily, many states have passed legislation banning these upfront fees and requiring the companies to get mortgage licenses. However, the crooks you should avoid often pay no attention to these rules anyway and they will be contacting you when they realize you might be desperate.

Tip Number 2: Contact a HUD-approved housing counselor first.

HUD approved housing counselors are trained to understand the current loan modification guidelines they will provide you – for free - and help with applying for a loan modification. They can guide you in determining if you are eligible for any of the government sponsored assistance programs such as the Making Home Affordable program.

You can find a list of HUD-approved counselors online at http://www.hud.gov/offices/hsg/sfh/hcc/fc/ or by calling 800-569-4287. You can also check with your local HUD office. The biggest benefit of these counselors is that they often have inside contacts in the lenders servicing departments to help speed the process along.

Tip Number 3: Contact your lender or mortgage loan servicer directly.

In the early days of the real estate crisis when few people had done a loan modification in decades, the customer service workers on the lenders’ staffs definitely had no clue what they were talking about when it came to modifying your loan. Now lenders have special departments set up to handle loan modifications and employees there are well trained in the guidelines. You might have to make a couple of extra calls to reach the right people, but don’t give up the first time you might hear a no.

Loan modification can be a tough and grinding process. If you are having trouble making your mortgage payments, don’t wait to start the process. The longer you give yourself to succeed, the more likely you are to be successful. Use the tips above to avoid criminals and save your home.

More Information

For more information about avoiding foreclosure and the best path to take to save your home, please visit Avoiding Foreclosure When Your Home is Financially Under Water and How To Qualify For The Home Affordable Modification Program (HAMP).

News Story On Loan Modification

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