10 December 2011
Loan Modification Scams: Don’t Bet the House

As if being upside down on a home mortgage isn’t bad enough, distressed homeowners are increasingly being preyed upon by fraudulent “loan modification” or “mortgage rescue” companies. These so-called “foreclosure consultants” are really just scammers looking to take your money while promising to save your home.

Scammers use various pitches, but the fraud usually boils down to one of these:

Bogus document prep — Some fraudsters say they can prepare your documents for you for a fee as you try for a loan modification. Of course, they take the money and disappear.

Attorney misrepresentation — Others claim to be an attorney or say they are working with an attorney. They “talk the talk,” using the same language used by big government programs and lenders to gain a homeowner’s trust.

Quit-claim deed scams — Other scammers get homeowners to sign paperwork that transfers ownership of the home to the fraudulent company or individual, which promises the homeowner a situation where he or she will be able to remain in the house. In a newer scam, those who have already lost their homes are being approached to pay money to get the home back.

Identity theft — Some con artists use the personal information they collect during the process to steal borrowers’ identities.

Learn the Warning Signs

Secrecy — Many scam artists will insist that homeowners not talk to their lenders to facilitate negotiations. The moment an aid company insists on secrecy, be extremely wary.

Demand for fees — The federal Mortgage Assistance Relief Services Rule prohibits firms offering mortgage-modification or mortgage-relief assistance from accepting up-front fees. Note that there’s an exception for attorneys, causing some scammers to pose as representatives of law offices. Always verify credentials first.

Generic sounding names — There’s a reason fraudulent firms have “generic-sounding” names. They are hard to research online and hard to do background checks on.

Guarantees — Be wary of too-good-to-be-true promises. No one can “guarantee” a loan modification or can “guarantee” the ability to stop a foreclosure.

Misdirected payments — The company or specialist tells homeowners to make their home mortgage payments directly to them and not to the mortgage lender (or tells the homeowner to transfer the property deed or title to the company).

Your Best Defense

After receiving hundreds of complaints, the Office of the Nevada Attorney General has established a Mortgage Fraud Strike Force to take action against predatory companies and individuals.

Still, your best defense is knowledge. Know that Nevada-based loan modification consultants must be licensed, registered and bonded with the Division of Mortgage Lending. Check online at http://mld.nv.gov/LicenseesPendingX.asp or call the Division at (702) 486-0780 in Las Vegas or (775) 684-7060 in Carson City.

For further information or questions about the services provided by a loan modification company, contact the Attorney General’s Bureau of Consumer Protection at (702) 486-3194 in Las Vegas or (775) 684-1180 in Carson City. A complaint form, as well as other valuable information on consumer protection, is also available on the Attorney General’s website at http://www.ag.state.nv.us/.


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