Homeowners Frequently the Target of Mortgage Modification Scams

We have all read reports detailing the collapse of the housing market. While the economy is showing small signs of improvement, home values continue to remain at record lows, especially in Florida. Many homeowners bought when the market was booming, leaving them trapped in mortgages that they can no longer afford.

Many government programs have been developed to assist struggling homeowners, to various degrees of success. The Home Affordable Modification Program, or HAMP, was one program put in place to help homeowners who were burdened with high mortgage payments. However, many homeowners had difficulty meeting HAMP requirements or grew frustrated with the process, meaning that they did not receive the relief that the program intended.

Unfortunately, with so many homeowners still desperate for help, many private companies began to emerge that offered assistance to those having difficulty making their monthly mortgage payments. They offered to work with mortgage holders and promised lower payments. For these services they charged their customers high fees.

Homeowners soon found that many of these organizations would never be able to deliver the services that they offered. Homeowners across the United States have fallen victim to these mortgage modification scams. By following the advice of these companies, many homeowners now find themselves facing potential foreclosure.

Tricks of the Trade

Companies offering assistance are very aggressive in pursuing potential victims. They send mass mailings, repeatedly air television commercials, purchase newspaper ad space and run radio ads during peak driving times. They want to appear to be interested in helping the struggling homeowner get back on solid financial footing. Many even imply that they have connections to government programs or mortgage companies that will guarantee a successful outcome for the homeowner.

Once hired, the company will give the homeowner instructions on what to do while awaiting the mortgage modification. They may advise the homeowner to stop paying his or her mortgage. Additionally, they may suggest that an individual stop all communication with the mortgage holder. In many cases, the companies require that homeowners continue to make their monthly mortgage payment, but instead of the money going to the lender, it is to be sent to the mortgage modification company.

As you can probably guess, the homeowner suddenly finds out that these companies performed no work on his or her behalf. The money is gone, the people who promised to work so hard do not return phone calls. The house ends up in foreclosure, and the homeowner is responsible for past-due mortgage payments and any other obligations that may arise.

Government Investigation

Because of the damage that these companies have caused, officials with the Treasury Department, along with the Consumer Financial Protection Bureau and the office of the Special Inspector General for the Troubled Asset Relief Program, or SIGTARP, have started an investigation into the questionable tactics being used. SIGTARP has already shut down several websites that offered fraudulent mortgage modification services. SIGTARP is also working with search engines to remove additional paid advertisements by mortgage modification scammers that may appear in search results.

How to Protect Yourself

While removing these companies from the internet is a positive first step, this is a booming industry. When one company disappears, there is another ready and willing to take its place. They come and go so quickly that it is nearly impossible to stop each and every one before the company is able to take advantage of a homeowner. As the investigation continues, officials have listed several tips for homeowners to help avoid mortgage modification scams:

  • Beware of third-party companies that guarantee a positive outcome - only mortgage holders can decide whether or not to modify a mortgage, and they are under no obligations to do so
  • Do not pay for a mortgage modification company for services up front - not only is it a sign that they may be in it for the money, but they may also be breaking the law, as this practice is illegal in many states
  • Many of these companies claim government or industry affiliations that they do not have - before agreeing to do business, carefully research your options and check with organizations to see if they are in fact affiliated with the mortgage modification company
  • Do not stop your monthly mortgage payment - past due amounts will accumulate, and you may not be able to stop a foreclosure if this happens

If it sounds too good to be true, it usually is. There are countless examples of these scam artists taking advantage of struggling homeowners. By the time the homeowner realizes what is happening, it is already too late. If you are worried about losing your home, contact an experienced bankruptcy attorney in your area to understand the options that may be available. The attorney can negotiate on your behalf with your mortgage holder to try to keep you in your home.