Millions of American homeowners are still underwater, attempting
or a loan modification to help make their mortgages more affordable
and their homes more valuable.
But far too many homeowners don't properly investigate the
supposed source for their mortgage relief and wind up scammed by
fake mortgage-relief companies.
Mortgage-relief scams became a burgeoning trend in the aftermath
of the Great Recession as massive home price declines wiped out
home equity leaving millions of homeowners
-- owing more on their mortgages than their properties are
With so many homeowners facing financial distress,
mortgage-relief scammers have stepped up their efforts to try and
separate vulnerable homeowners from their money.
According to the
U.S. Federal Trade Commission
, "Mortgage relief scammers falsely claim that, for a fee
(typically hundreds or thousands of dollars paid up-front), they
will negotiate with consumers' mortgage lenders or servicers to
obtain a loan modification or other relief to avoid delinquency or
foreclosure. Many of them pretend to be affiliated with the
government or government housing assistance programs. Some falsely
claim to be offering legal services or 'audits' of consumers' loan
paperwork to help them negotiate a resolution with their lenders.
Unfortunately, these operations often fail to obtain the relief
they promise, and they sometimes fail to take even minimal steps to
Jeremy Heck, a consumer law attorney in Columbus, Ohio says
there are two major types of mortgage-relief scammers that
advertise heavily via the Internet and mail.
"There are mortgage brokers that attempt to
a consumer's residential real estate for what amounts to
extraordinarily high fees," he explains. "There are other companies
that advertise to modify a consumer's mortgage and claim they can
achieve a much lower interest rate. Both of these types of
companies advertise in a way that implies they are related to or
are part of a governmental organization."
Here are four tips to help prevent mortgage-relief scams:
Do not pay any money up front
Heck notes that some loan-modification companies charge high
fees of between $2,500 and $5,000. "But at the end of the day, they
provide absolutely no benefit," he says. If you are talking to a
mortgage-relief company that promises they can reduce your home
loan, ask for testimonials and references from satisfied clients --
and never put any money down until you see some results.
Don't assume you are safe from foreclosure
If you've been receiving mortgage delinquency notices from your
mortgage lender, you may be closer to foreclosure than you might
think. At that point, it's much better to work directly with your
bank or lender than a mortgage-relief company. "Many times a
consumer will believe they are protected from foreclosure having
retained a loan modification company, but in reality, there is no
protection and a foreclosure is usually imminent," says Heck.
Ask a lot of questions
If you do decide to hire a mortgage-relief company, start asking
questions, and don't agree to anything until you get those
"When trying to identify a scam, mortgage or otherwise, I always
recommend sticking to the basics," advises David Reiss, professor
of law at the Brooklyn Law School. "Does the person have a call
back number? Does the organization have a website? Will they put
their promises in writing soon after meeting you? Will they show
you the documents that they want you to sign soon after you agree
to their terms? Very often these basic questions will review a scam
for what it is."
Watch for common "red flags"
Becky Walzak, senior partner of Looking Glass Group, a mortgage
services firm in Deerfield Beach, Fla., says diligence is the key.
She says to stay away from mortgage-relief companies that want all
of your individual information such as social security number,
credit card information, etc., over the phone, and who offer no
written documentation of their strategies and track record.
"If they do offer references, call and ask specific questions
such as when they helped, how they helped, how did you find out
about them," she says.
Being ripped off by a mortgage-relief scam when you're fighting
to save your home is a financial disaster that may take years to
Proceed cautiously with mortgage-relief companies, and don't hire
anyone without the proper due diligence. You may wish to hire a
real estate attorney to help you review documents and contracts for