Beware of Loan Modification Scams

Anytime people face adversity there are always those waiting in the wings to exploit them and prey upon their situation to make a buck. One of the most prominent scams that have hit our industry over the last year has been loan modification companies. They target people who are behind in payments, facing foreclosure and offer them hope under the guise of expert advice and the promise to obtain a loan modification that will help them get out of their financial problems with their bank.
On the face of it, this appears to be a laudable goal but the reality is that they require some degree of payment up front, and then fail to provide the sought after modification. In some cases, it has been shown that they take people's money and don't even try to obtain a modification. Basically they take money from people who are already facing financial difficulty and often fail to deliver any relief.

These companies have become an increasing target for the FBI and other Federal agencies. Many have been closed down and the people running them have been arrested or fined.

Unfortunately, there are just as many entering the market as are being removed through legal action.

These companies don't offer anything that the homeowner cannot do themselves. It can and will be a tough road to get your voice heard by your lender. Here are some helpful tips if one of your clients needs to seek a modification:

- The people that you first speak to in customer service will likely be trained to try and fend you off, but you need to be persistent and work your way up the ladder to a person in authority.

- If the customer service people tell you that the Loss Mitigation Department won't speak with you unless you are behind by several payments; DON'T listen to them. It is your credit and you shouldn't voluntarily damage it if you can possibly avoid it. Your case will ultimately be stronger by showing you take your obligations seriously.

- The reason the Bank will make it tough to get anywhere at the beginning is that for every one of their clients that have a legitimate need for a modification, there are two more that can make the payments but just don't want to and are trying to reduce their payment.

- Be prepared to provide lots of documentation, very similar to applying for a loan. You need to show that your situation is deteriorating and prove that you have a willingness to hang in there but if you don't get relief, then you will end up defaulting.

- If they grant you the modification, they have to feel certain that you can live with the adjusted terms of your loan and successfully continue to make payments. Look closely at your situation and at the terms of any modification you are offered; if you can't really continue to make payments under the new terms, then their isn't any point in continuing.

The number of modifications being done is growing everyday. Banks are seeing the value for making modifications and their investors are becoming more accustomed to the idea. Last year the number of modifications was very small and reflected the industry's reluctance to get involved. Now the tide is changing and your chances of getting a modification continue to improve.

Work with your bank and don't let anyone take advantage of you.