Friday, July 18, 2014
Friday, July 11, 2014
Don’t get scammed by paying a fee upfront for a loan modification (unless it is for an attorney)
Loan modification scams are on the
rise, says Barbara Jones, senior manager of national homeownership programs at
NeighborWorks America. These scams often work because people do not know much
about the loan modification process and are vulnerable to predators peddling
loan modification fixes.
Jones took to the streets to ask a few questions. She asked people how much they would be willing to pay to have their mortgage changed to give them a financial break. One person said he would be willing to pay between $10,000 and $20,000. One woman said she would be willing to pay “whatever it would take to keep my home, especially if I’m in foreclosure.” What they didn’t know is that it is illegal for a company to collect upfront fees for mortgage relief services, unless it’s an attorney who focuses on those types of legal services. Under the FTC Mortgage Assistance Relief Services rule, known as MARS, companies pitching these services are prohibited from collecting any fees until they have provided a written offer from a lender or servicer that the consumer decides is acceptable (attorneys are exempt from the MARS rule and can accept an advanced legal fee to represent and handle these loan modification cases). Also, there must be full disclosure from the lender describing the key changes to the mortgage that would result if the borrower accepted the offer.
Many homeowners are not getting relief through federal and state programs created to speed loan refinances and modifications, making them vulnerable to these illegal scams. It is estimated that more than $93.6 million has gone to loan modification scammers.
To avoid a scam, it will help to remember two key tips. First, you should never be given a guarantee that your foreclosure can be stopped or loan modified. Second, do not pay a fee in advance to modify, refinance or work out issues with your mortgage unless it’s to an attorney who focuses on that area of practice.
The Making Home Affordable program has been extended through 2016, so companies perpetrating loan modification scams are likely to continue surfacing. Borrowers must be informed to protect themselves.
Jones took to the streets to ask a few questions. She asked people how much they would be willing to pay to have their mortgage changed to give them a financial break. One person said he would be willing to pay between $10,000 and $20,000. One woman said she would be willing to pay “whatever it would take to keep my home, especially if I’m in foreclosure.” What they didn’t know is that it is illegal for a company to collect upfront fees for mortgage relief services, unless it’s an attorney who focuses on those types of legal services. Under the FTC Mortgage Assistance Relief Services rule, known as MARS, companies pitching these services are prohibited from collecting any fees until they have provided a written offer from a lender or servicer that the consumer decides is acceptable (attorneys are exempt from the MARS rule and can accept an advanced legal fee to represent and handle these loan modification cases). Also, there must be full disclosure from the lender describing the key changes to the mortgage that would result if the borrower accepted the offer.
Many homeowners are not getting relief through federal and state programs created to speed loan refinances and modifications, making them vulnerable to these illegal scams. It is estimated that more than $93.6 million has gone to loan modification scammers.
To avoid a scam, it will help to remember two key tips. First, you should never be given a guarantee that your foreclosure can be stopped or loan modified. Second, do not pay a fee in advance to modify, refinance or work out issues with your mortgage unless it’s to an attorney who focuses on that area of practice.
The Making Home Affordable program has been extended through 2016, so companies perpetrating loan modification scams are likely to continue surfacing. Borrowers must be informed to protect themselves.
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