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Don’t Get Scammed By Dishonest Loan Modification Companies

More news today about loan modification companies and the troubles people are having in paying them for help.

“They convinced me they could help save my home and intervene on my behalf as a third party with my mortgage company,” said Mr. Briscoe, who bought his Tucson home in 2005. The company charged him $2,000 and told him he should stop paying the mortgage for three months. “This is back in January of this year when I contacted the company,” he said. “And here it is in June, and my home is in foreclosure.”

Read the full story in the New York Times

Dont Get Scammed By Dishonest Loan Modification Companies
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About Steve Rhode

Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
  • http://www.loanmodification--411.com/ Heather The Loan Modification Queen

    It is very sad there are many examples like this of people taking money from those who need help in the first place.

    What happened to the lenders and their companies looking out for the best interest of the homeowners? I am glad there are loan modification specialists out there willing to work with the mortgage companies.

    Do you feel that the government is doing enough to help out the homeowners?

    • http://GetOutOfDebt.org Steve Rhode

      I’m not sure when lenders ever looked out for people first. It is always profits first.

      But these days it is near impossible to tell the loan modification scams from a modification company you could trust.

      Steve

  • http://www.chs-law.com/rss.xml Carl H. Starrett II

    Karen, in addition to to Steve’s comments, an attorney that fails to return unearned fees can be disciplined or even disbarred. In bankruptcy, collecting fees up front is mandatory. If a client owes me money at the time I file their case, I become a creditor as well. I cannot legally or ethically collect what is owed to me. The legal profession is highly regulated and there are very precise rules that we as attorneys need to follow.

    There are a lot of “Johnny-come-latelies” to the loan modification industry. The California State Bar has even issues an ethics warning that attorneys should beware of people looking to “partner” with them to get around the prohibition against up front fees.

    As the economy continues to worsen, businesses offering credit counseling, debt management and other “quick fix” plans continue springing up to offer debt relief services to consumers. Loan modifications are an area where consumers might be particularly vulnerable. I wrote an article over the weekend about California so-called foreclosure moratorium and I’m already callings from confused debtors who don’t know where to turn.
    .-= Carl H. Starrett II´s last blog ..California’s 90-Day Foreclosure Moratorium Really Isn’t =-.

  • Karen Jaffe

    Carl, attorneys ask for fees up front and no one calls them “scam artists.” (okay, maybe some of them are :-). When I went to a bankruptcy attorney in 1998, he wouldn’t even begin my case until I gave him $1,000. When I went for my divorce, the attorney asked for money up front. The truth is that once a modification comes through, the chances of the company being paid is pretty slim. This has happened on more than one occasion in our company. Steve, I only work here and I doubt they’d be willing, but there’s no harm in asking.

    • http://GetOutOfDebt.org Steve Rhode

      Karen,

      Thanks for asking. I think the big difference, from my point of view, between up-front fees with a mortgage modification and bankruptcy is that with bankruptcy the rules are spelled out and an attorney knows in advance, most of the time, if a case conforms and is going to get through.

      With charging for mortgage modification services, it is all up in the air and without any clear universal rules, a modification may not be available, even if it conforms with the very case before it. Creditors do change the rules as and when they want.

      But don’t worry, lawyers that are selling mortgage modification services are getting in hot water also. The attorney generals of a couple of states are going after some law firms as well.

      I understand the whole up-front fee argument. it is one that I used to make when we sold services that had to be paid for in advance. The key here is expectation of a successful outcome. If you are in debt and pay a car mechanic for repair services, you know that the car will be repaired. If you pay for loan modification services, it is not a given and the modification company can’t get past a firm no if that is what the mortgage company, for whatever reason, wants to say.

      Steve

  • http://www.chs-law.com/rss.xml Carl H. Starrett II

    One of the biggest warning signs about a possible loan modification scam is when they ask for fees up front. In California, only attorneys and certain brokers with contracts approved by the California Department of Real Estate can collect fees up front. Someone that is “working with” an attorney or a broker is probably a scam artists.

  • Karen Jaffe

    As I mentioned in a previous post, there are honest and reputable companies out there. See if they can provide references for their work, check them out to see if they are accredited with the better business bureau and whether they have any complaints against them. Since a modification is a negotiation with your bank, there is no way anyone can know the outcome in advance, so be wary of companies that make promises as in promising you will get a particular interest rate or telling you they absolutely will get your principal reduced. Also, if they tell you to stop paying your mortgage (that is so you have the money to pay them), that should be a big red flag. I would like to mention, however, that clients have told me their banks told them they would not help them unless they went late on their mortgage. I think this is to discourage people from asking for modifications because their are so many homeowners who don’t want to ruin their credit.

    • http://GetOutOfDebt.org Steve Rhode

      Karen,

      One of the requests that I have made to loan modification companies that come in and comment is to work with a client from the site, for free, and show us all that it works. Do you think your company would be willing to do that. Nobody else has.

      Sometimes actions speak louder than words. What do you say? You willing to do that?

      Steve

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