Avoiding Scams When Looking For Mortgage Modification

Before signing any papers for a loan modification, speak to an attorney or a state regulatory agency. You will want to speak with someone who is familiar with the governing process of these companies. Also, make sure the loan modification company has filed a contract with your state and that they hold a valid state license. In addition, make sure they are willing to go through the United States Postal service for pickup and delivery of funds and documents. If not, it could be that they are just trying to skirt issues of mail fraud.

Avoiding Scams When Looking For Mortgage ModificationGet educated on loan modifications. Know what your loan options are. Have several different real estate agents give you a comparative market analysis (CMA) to see what your home would sell for. Seek the advice of an attorney if you want to pursue keeping your home.

Here are some of the common things many "scam" companies will say when you call and ask them if they can help you save your home.

1. "By signing the title of your home over to us, we can salvage your credit. That way when the foreclosure is issued, it's our name that will be recorded."

Busted - In truth, a home foreclosure is always recorded against the borrower. It doesn't matter whose name is on title. The person who borrowed the funds is responsible. If you fall for this, you now owe money on something you no longer own.

2. "We will help you out of this situation by giving you some money AND paying your delinquent payments. Just sign the title to your house over."

Busted - If you don't mind being at the mercy of a lot of uncertainty, this might not be a problem. However, carefully consider this: Are you losing home equity you may have built in your home? Can the buyer really cure the default? Will the buyer really make the mortgage payments? Do you want to be responsible for a home loan on property you no longer own? There are a lot of maybe's and what if's in this scenario, so it's hard to make a call; be careful, and have an attorney on hand to review contracts before you sign them.

3. "Let us buy your home and you can lease it back from us. We'll make sure you can buy it from us later."

Busted — So you sell your house for less than it is worth, rent it for more than you should and then buy it again later at a higher price. Doesn't sound like much of a bargain. Now you've not only lost money, but you will most likely have a higher loan amount than you did before and probably at a higher interest rate. It will probably be harder to qualify for a loan and the payments will be more. A better choice? Sell it on the open market or consider a hard equity loan if you have the equity in the property to do so.

4. "We can help you refinance your property and pay off some of your bills."

Busted — Refinancing costs money - which is usually rolled into the new loan amount. This not only costs you money, but eats into the equity you have in your home.

When looking at mortgage lenders, consider the total amount of the loan, instead of getting stuck on how much the monthly payment is. Traditionally, these loans have higher interest rates and more fees.

5. "Home Foreclosures are my specialty. I know I can get you top dollar and help you out from the strain you've been under."

Busted — There are agents who search the public records looking for people who are in pre-foreclosure. They give these names to investors who make ridiculously low offers, all in the name of "helping." Many times, if the seller had interviewed three agents from the area and gotten comparative market analysis' done on their homes, they would have gotten a better deal. Always do your homework and work with an attorney if possible.

6. "Declare Bankruptcy - Stop the Foreclosure."

Busted - Foreclosures are NOT stopped by declaring bankruptcy. It just stalls the foreclosure process, and gives you a little extra time to organize your finances better. Contact a local attorney who specializes in bankruptcy and see if this is truly your best option. Wrong choices can make the situation even worse so make sure you choose someone who knows what they are doing. Are you looking for a bargain or do you want the job done properly?

7. "In exchange for paying us to modify your loan, we can arrange to have your mortgage payments frozen for 3 to 5 months.

Busted - Many mortgage modification companies get paid in advance for their assistance in stopping foreclosure by making false representations to homeowners. Some companies are not operating legally even though they offer money back guarantees. A number of these loan modification companies simply take the money and run, while others arrange only for you to receive the same unaffordable forbearance agreement you were already offered by your lender. Make sure you are working with a reputable company. Beware if they start offering rebates or making offers that sound too good to be true.

In closing, remember to do your homework. Just because you find yourself in a difficult situation, don't lose your head. Speak to several experts and get several opinions. A knight in shining armor may end up being a nightmare.