About the Loan Modification Scam Epidemic

Today, the national foreclosure rate stands at an all-time high of 8% of all mortgages.
Every 13 seconds in America, there is another foreclosure filing.
There are more than 6,600 home foreclosure filings per day.
Experts are predicting an estimated 8.1 million foreclosures by 2012.

This already tumultuous environment provides great opportunity for loan modification scam artists, who prey on unsuspecting homeowners with unethical and sometimes unlawful tactics to scam them out of money and often times their homes.

Many of these homeowners have turned to loan modification or foreclosure rescue companies for help — only to realize they’ve been scammed.

Loan modification scams are proliferating at a rapid pace. Every day, more homeowners are falling prey to the slick advertising and sales pitches that guarantee to keep them in their homes.

Many scam artists are openly taking advantage of people in difficult circumstances online, on the telephone, and sometimes audaciously knocking on doors.

About the Loan Modification Scam Alert Campaign

To combat this issue, Congress asked NeighborWorks® America to launch a national public education campaign to empower homeowners to educate homeowners about loan modification scams.

The campaign will target all audiences, but its resources are focused sharpest on those groups that have already seen high levels of scam activity, including seniors, Hispanics, African Americans and Asian Americans

Our mission is threefold:

1. First, ALERT homeowners about scams.
2. Second, help them spot a scam before it’s too late.
3. Third, encourage them to report scammers to the authorities.

Through an integrated marketing and earned media campaign, NeighborWorks® America is working with its national, state and local partners on the ground and 235 community-based affiliates to educate and protect homeowners from unethical practices.

Campaign partners will alert thousands of homeowners in communities at high risk for scam activity through real-life scam stories, fliers, postcards, e-cards, posters, print advertising, local PSAs, events, word of mouth and social media activity.

What Homeowners Can Do to Avoid Scams

Homeowners at risk of foreclosure and looking for loan modification guidance should avoid any company or person who:

1.    Asks for fees in advance
2.   Guarantees that they ll stop a foreclosure or modify a loan
3.   Tells you to stop paying your mortgage company and to pay them instead.

For loan modification guidance from a HUD-approved counseling agency call 1-888-995-HOPE (4673)  they are available 24 hours a day, seven days a week or visit www.LoanScamAlert.org

Sources:
NeighborWorks® America
The Center For Responsible Lending
Mortgage Bankers Association
The Credit Suisse Group
The Office of the Attorney General of California

Questions & Answers on Foreclosure Scams

What is a Foreclosure “Rescue” Scam?
Simply put – foreclosure rescue fraud happens when a company or person promises to help save your home from foreclosure, but is actually intent on stealing your home, most of the equity you have accumulated in your home, or a substantial amount of money.

There are several types of Foreclosure Rescue Scams you should be aware of:

• Foreclosure Prevention Specialist – these are phony foreclosure counselors who may try to collect large sums of money but rarely provide any services.
• Phantom Help – individuals who charge high fees for work the homeowner could do his or herself.
• Lease/Buy Back – homeowners are deceived into signing over the deed to their homes.
• False Bailout – the homeowner is led to believe that he or she can rent his or her home from the new owners and eventually repurchase the home.
• Bait and Switch – the homeowner thinks he or she is signing new mortgage documents, but is actually signing over the deed to their home.

How do I know whether a foreclosure modification company is legitimate?
You should avoid any company that asks you to pay an up-front fee for its services, no matter what that fee is called. You should also avoid any company that promises you that it can save your home or get you a reduced mortgage interest rate. You can call the Attorney General Hotline at 1-866-966-7226 and check to see if there are any complaints.

Do I need to stop paying my mortgage in order to qualify for a loan modification?
No. Avoid any company that instructs you to stop paying your mortgage.

I paid money to a company several months ago and now they are no longer answering their phones or responding to my emails. What should I do?
You should always attempt to negotiate with your original lender first, and you should re-contact them if you still need assistance. You should also file a complaint with the Attorney General’s Office.

I negotiated a loan modification with a company in California and paid an up-front fee for its service. I was reading about the companies in Florida which are being sued for charging these fees. Does the Florida law only apply to Florida companies?
No. The statute applies to ALL companies, regardless of where they are located, if they are assisting a consumer who owns real property in the State of Florida or if the companies are located in Florida.

I am not a Florida resident and a Florida foreclosure rescue company is attempting to charge me an up-front fee. The company told me that the new law only applies to Florida residents, and they can charge out-of-state residents an upfront fee. Is this correct?
No. The law applies to any company doing business in Florida.

I received a flyer in the mail or a telephone call from a company that sounded like it was affiliated with the government. What should I do?
Do not respond to any solicitation, either by mail or by telephone, which does not come from someone you already know and trust. These types of solicitations usually are from private, for-profit companies which are only looking to make money.

I am attempting to do a loan modification with a licensed Florida mortgage broker. He says he can charge me an application fee under Florida law. Is this correct?
No. The Office of Financial Regulation has stated that loan modifications are not governed under their regulatory statutes. Consequently, even Florida licensed mortgage brokers are governed by Florida Statute 501.1377 and may not charge an application fee or any other upfront fee directly or indirectly.

I have been told by the loan modification company that the fee it is charging is for a forensic audit. Is this legal?
No. Loan modification companies cannot charge any fee or secure payment for any service that has not been completed.

NOTE: Beginning January 1, 2010, any individual or company that provides loan modification services must have an active license from the Florida Office of Financial Regulation. This new provision further enhances the Foreclosure Rescue Fraud Prevention Act, which prohibits individuals and businesses from collecting up-front fees for loan modification services related to foreclosures.

Debt Help & Relief                                          Mortgage Help & Relief

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