Consumer Alert: 5 Ways to Spot a Loan Modification Scam

Many homeowners are facing a seemingly never-ending sea of document requests and resubmission of paperwork to their lenders. There is an increase in mail and telephone solicitations as well. Many of these solicitors are looking for ways to get money out of you and may not have your best interest in mind. Here are five surefire ways to spot a scam BEFORE you get taken for thousands of dollars!

1. Be aware of any company that guarantees a loan modification or a way to stop your foreclosure.

No company or attorney has this power, and anyone guaranteeing such results has lied to you before you even contacted them. Check with your local housing counselor for ways to work with your lender or how to stop or postpone your foreclosure (laws vary greatly from state to state).

2. Nobody should have to pay for help with their mortgage situation.

Do NOT divert your mortgage payments to a third party whether or not your lender is accepting your payments. If the lender has returned a payment or stopped accepting single payments, start putting payments aside in your own private savings account. Avoid anyone or any place asking for a fee, especially any fees (attorney retainers or otherwise) that are collected before any service is provided. It is illegal in many states to collect fees for services not provided, but one common loophole is to ask for an attorney retainer fee. There is free, HUD-certified housing counseling available in every state, and can be found at HUD.gov.

3. Be aware of companies trying to resemble or represent themselves as government agencies.

It is illegal to represent oneself as a government agency when they are not. Many mailings, websites, and television commercials offer help in “taking advantage of billions in government bailouts” or even use company names with initials that spell HUD or FHA in their telephone numbers and website domains.

4. Be aware of any company that asks you to sign a quit claim deed or release of information.

Do NOT, under any circumstances, sign over the title of your property to anyone!!! Be very careful whom you allow to represent you. Do not authorize anyone to speak to your lender on your behalf unless you are 100% certain they are a HUD-Certified Housing Counselor.

5. Do not share personal information with any third party that contacts you first. 

You should not give your date of birth, account numbers, or even your zip code to anyone that calls you or knocks on your door. These crucial pieces of information are used by your lender to verify your identity as a caller. Be careful of seemingly innocent questions like pet or kid names, your high school or favorite sports team, etc. These are often used as security verification questions when you (or someone else!!) tries to log in from an unrecognized computer or device.

Remember to “trust your gut."

Your instincts are usually right and you should listen to that nagging voice in your head when something just doesn’t feel quite right. If you feel you have been approached by a scammer, get any identifying information you can and share it with your state’s Attorney General, Department of Commerce, and/or your local HUD-certified housing counselor.

Want FREE and unbiased help regarding your mortgage? LSS Financial Counseling has HUD-certified housing counselors available to help you determine realistic options regarding your mortgage. Our financial counselors can also help you create an action plan if you're looking to pay down your debts and improve your finances. Get all your support online, or call 888.577.2227 today!

Author Malcolm Johannessen with LSS is a HUD-Certified Housing Counselor and specializes in Foreclosure Prevention Counseling.