NeighborWorks America Urges Homeowners to Avoid Paying for Loan Modifications

WASHINGTON  -- Like many homeowners, Sixto Diaz was current on his mortgage when he decided to get a loan modification. His monthly payment was increasing and the mortgage was upside down so he reached out to aCalifornia company for help. They promised he would get a loan modification if he paid them $3,000. They guaranteed results so he paid the money and hoped for the best. One year passed with no results. Then he realized he had lost his money to scammers. Fortunately, he is working with a HUD-approved counseling agency free of charge to get a loan modification.

NeighborWorks America urges homeowners to avoid paying for a loan modification or to stop a foreclosure. They released a video featuring everyday people that illustrates how homeowners, like Sixto Diaz, are willing to pay thousands of dollars if they think it will save their home. Free help is available from their lender or a HUD-approved counseling agency. Yet scam artists often ask homeowners for a payment or administrative "fees," usually upfront. The Federal Trade Commission issued the Mortgage Assistance Relief Services (MARS) rule which made it illegal for companies to request money upfront. But when mortgage problems arise, many homeowners are lured by the promise of help.

"Homeowners could be vulnerable to a scam if they seek a loan modification from a third party, whether their mortgage is current or delinquent. Loan scam artists are relentless. We tell consumers that being asked for a payment, especially upfront, is the #1 sign of a scam," says Barbara Floyd Jones, senior manager of National Homeownership Programs at NeighborWorks America. "Consumers in the video were willing to pay thousands to get help, which shows just how far homeowners will go to save their homes. We want homeowners to learn the signs of a scam and report the scam artists so they can protect themselves, friends and family when seeking a loan modification or a solution to foreclosure."

Loan modification scams can be difficult to spot but the top signs include:

1. A company/person asks for a fee in advance to work with your lender to modify, refinance or reinstate your mortgage.
2. A company/person guarantees they can stop a foreclosure or get your loan modified.
3. A company/person advises you to stop paying your mortgage company and pay them instead.

Homeowners are encouraged to seek free assistance from a HUD-approved counseling agency. "In addition to helping homeowners seek a modification or stop foreclosure, housing counselors can determine if they may qualify for mortgage assistance programs or other types of assistance. They can refer homeowners to free or low-cost legal assistance if needed," said Floyd Jones.  

To find a local HUD-approved counseling agency, speak to a housing counselor 24 hours a day or report a scam, call 888-995-HOPE (4673). Or visit LoanScamAlert.org to learn more.