Loan Modification Scams: The New Foreclosure Rescue Scams?
Back in the early days of the foreclosure crisis, consumer advocates were warning about foreclosure rescue scams, which caused thousands of distressed homeowners to part with their money and, often, their last chance of staying in their homes.
Now, unscrupulous individuals are scamming struggling homeowners out of their money in a slightly different way.
Loan Modification Scams
Apparently, “forensic audits” are at the heart of this scam. Here’s how they work:
- You pay a mortgage loan auditor. Scammers of all sorts are notorious for upfront fees, and the loan modification scammers are apparently no different. If someone asks for fees before performing a service, be very wary.
- The auditor examines your loan for fraud. Theoretically, a loan auditor’s job is to review your mortgage documents and discover any illegal activity on the part of the lender.
- The auditor goes to your lender. Once evidence of fraud comes to light, an honest auditor can take it to the lender and use it as a bargaining chip to get you better terms on your loan.
But, naturally, the dishonest auditors out there won’t follow through. They may fail to thoroughly examine your loan papers, fail to actually visit and negotiate with your lender or simply walk away with your money.
Protect Yourself, Your Money and Your Home
If you are in danger of losing your home to foreclosure, you’ve probably considered applying for the government’s Home Affordable Modification Program (HAMP). To see if you qualify, start by taking this survey at the government’s HAMP website.
Once you know whether you can reasonably expect a modification from your bank, consider researching loan auditors in your area (honest ones may in fact be able to help you find fraud in your loan – and they won’t charge you fees until they’ve actually helped you).
To verify a company’s credibility, check out their standing with your state’s Better Business Bureau (BBB).
Other Options
If a loan modification isn’t in the cards based on your loan, you may be able to stave off foreclosure by filing for Chapter 13 bankruptcy. A bankruptcy lawyer in your area may be able to help you determine whether this is the best path for you.
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