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Watch For Loan Modification Scams

When debt becomes overwhelming and the threat of home foreclosure looms, it can be easy to lose hope. Then, when an individual or business comes along with promises to fix the problem, people want to believe. However, as the saying goes, if something seems too good to be true, it probably is. Unfortunately, in these times of economic turmoil, there are many predators preying on vulnerable homeowners who are desperate for help.

Two recent reports show the types of fraud schemes perpetrated against homeowners looking for help with mortgage modifications to help stave off foreclosure.

Predatory Loan Modification Services Have Taken Millions

An article in the Orange County Register details the case of a man who allegedly defrauded hundreds of homeowners to the tune of $2 million. This man presented himself as an attorney with the U.S. Department of Housing and Urban Development and promised victims that he could reduce their monthly mortgage payments for a fee. He is accused of pocketing the fee and doing nothing for his clients. Not only was he not actually affiliated with the U.S. Department of Housing and Urban Development, he was also never licensed to practice law in the state.

A press release from the Department of Justice addresses the case of a man who opened a variety of businesses with names like Express Modifications and Express Home Solutions, which also made promises to victims that they could obtain loan modifications for a fee. Over a thousand distressed homeowners were told that they were hiring a law firm and getting an attorney to help them negotiate with their banks. In reality, the businesses did little or no work, and the homeowners lost between $3 and $5 million.

Homeowners: Proceed With Caution

The good news is that law enforcement agencies like President Obama's Financial Fraud Enforcement Task Force (FFETF) are taking action to put a stop to these loan modification schemes. The bad news is that there are still predators out there, operating illegally or staying just within the bounds of the law. Homeowners must use care when getting help with loan modification.

Here are some tips:

  • Promises of success are red flags. No organization can absolutely guarantee success.
  • Work with a lawyer, and verify that he or she is actually licensed. While a lawyer cannot necessarily guarantee success either, he or she will be able to pursue legal remedies.
  • Verify affiliation with any organization. If someone says he or she works with the U.S. Department of Housing and Urban Development or another organization, contact that organization for verification. Note that such affiliation is not necessary in order to successfully obtain a mortgage modification.

Loan Modification Is Only One Option

While loan modification may help to address your debt problems and prevent foreclosure, be aware that it is not the only option. Attorney Matthew Obermeier offers loan modification services and other foreclosure prevention techniques. He will review your situation and guide you toward the option that makes the most sense for you and will be most effective for keeping you in your home. The consultation is free.

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