How do I Avoid Loan Modification Scams?

Florence J. Tipton

There are several ways to avoid falling prey to loan modification scams. First, educating yourself about the loan modification process may help in recognizing legitimate opportunities to avoid a foreclosure. Generally, there are specific foreclosure scam warning signs that could highlight potential problems. If you decide to accept a loan modification to prevent a foreclosure, you should thoroughly read the agreement. You may circumvent loan modification scams by asking specific questions about provisions in the agreement that you do not understand.

Scammers may make false claims about their ability to prevent or stop foreclosure proceedings.
Scammers may make false claims about their ability to prevent or stop foreclosure proceedings.

Homeowners who face the possibility of foreclosure may not use sound judgment for fear of losing a home. This may leave some vulnerable to loan modification scams. The best way to avoid loan modification scams is to understand the process for modifying a mortgage loan. Knowing what to expect may alert you to possible fraud. While some mortgage products may vary among legitimate lenders, the process of modifying a mortgage usually has specific procedures.

Typically, you can initiate the loan modification process with your lender. By starting with your mortgage lender, you may learn about the options available for foreclosure prevention. This can ensure that you are receiving legitimate information and documents. Alternately, you should use caution if you do not initiate contact with a firm.

In general, a way to avoid loan modification scams is to send your mortgage payments to the original lender. Sending your mortgage payments to a person or firm is a common warning sign of a scam. Most will never forward the payments to the original lender and you will still owe the money.

Another warning sign of a scam is sending money to begin the modification process. Illegitimate firms will typically offer services for a fee with guarantees that the foreclosure proceedings will cease and you can keep your home. Keeping your home might still be an option, but your lender or local government housing agency may have a free loan modification program.

You might also steer clear of loan modification scams by understanding that accepting a rental or lease agreement does not modify your current loan. A person or firm may use this deceptive tactic to buy your home. Generally, you are required to sign over the deed and make payments to the person or firm. With this type of agreement, you are no longer a homeowner, but a renter. Further, you could still have obligations to repay the original mortgage on the house.

Carefully reading a loan modification agreement before signing can ensure that your interests are included in writing. Generally, you want to know that the written agreement includes everything previously discussed and you are not relying on verbal promises. It is also a good idea to ask questions before signing the agreement to clarify terms and conditions.

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