The Law Office of Boyd M. Mayo, PLLC

Be Wary of Loan Modification Scams

There is a wave of foreclosure and loan modification scams being perpetrated by third party private companies.

 

These entities often reach out by phone, e-mail, or letter to individuals and families who are facing financial hardships that have put them in arrears on their mortgage payments and may be facing foreclosure in court or through a trustee sale.

 

Often times, representatives of loan modification or debt adjusting companies engage in high-pressure sales tactics, preying on consumers’ fears of losing their homes and the stigma associated with foreclosure, to dupe a financially distressed consumer into the program.  Unfortunately, these programs charge exorbitant upfront fees (that could go to paying off principal and interest on the loan) and accomplish little, if anything, for the consumers involved.  This conduct violates Washington’s Debt Adjusting, Mortgage Brokers Practice, and Consumer Protection Acts in a variety of manners.

 

Don’t fall for these scams.  But if you do, we are here to help you.

 

You can read more on these scams at the website maintained by the Washington Attorney General’s office:  http://www.atg.wa.gov/mortgage-and-foreclosure-scams which offers some good advice and overview:

 

  • A number of businesses that claim to offer loan modifications are really looking to make a buck.  Scammers ask homeowners for an upfront fee then provide services that the homeowner could have received for free through a nonprofit organization or from their lender. Sometimes, they provide no help at all.
  • It is illegal for an unlicensed provider of loan modification services to collect a fee in advance for such assistance. In addition, there are limits on the fees that licensed providers can charge. The Federal Trade Commission recently banned  mortgage relief companies from collecting fees until homeowners have received an acceptable written offer from a lender or servicer. Attorneys are generally exempted from the rule but must place any fees they collect in a client trust account and abide by state laws and regulations covering such accounts.
  • Be especially wary of anyone who asks for your bank account information in order to withdraw funds before they provide service, or tells you not to communicate with your lender or servicer.
  • Many loan modification companies are guaranteeing success rates of 90 percent in higher in negotiating loan modifications. We think promises like this are probably too good to be true. The reality is that lenders will not agree to a loan modification in every situation.
  • The Washington State Department of Financial Institutions  requires that any provider offering loan modifications be licensed as loan originators, mortgage brokers, or consumer loan companies.  If you choose to go with a loan modification business, verify they have a license by checking the DFI website or by calling 1-877-RING-DFI. You can also check the Nationwide Mortgage Licensing System and Registry database to verify that a mortgage company, branch or individual is licensed.

 

Foreclosure Rescue ScamsSea consciente de Estafas de Rescate de Ejecución de Hipoteca!)

 

Scammers approach homeowners promising to help them keep their homes but instead take the owner’s money, home or equity. Homeowners  frequently do not understand the transaction.  These scams can take several forms:

 

  • Rent-to-buy schemes: Scammers lead homeowners to sign over the deed to their property by promising to sell the home back once the homeowners get back on their feet and allowing them to remain in the home as tenants in the meantime.   In the end, the homeowner can’t buy the house back and the supposed rescuers get most, if not all, of the equity. Sometimes the rent is set so high that the homeowner can’t afford the new payments and is evicted. For legitimate transactions, a Washington state law requires a written contract with clearly disclosed terms to be completed by the homeowner and the purchaser prior to the property’s transfer. It also requires that the homeowner must receive at least 82 percent of the difference between the property’s fair market value and the underlying mortgage in the event of a sale to a third party.
  • Phantom help: In this scam, the supposed rescuer charges very high fees and claims he can negotiate a deal with your lender — he may even claim to have done so. You may be told not to contact your lender, lawyer or a credit counselor and to let the scam artist handle all the details. You receive no real help or too little, too late.
  • Bait-and-switch:  Swindlers tell the victim that they are signing documents for a new loan that will solve their problems. In reality, they are signing documents that will give the crooks ownership of the home. To make matters worse, the victim still owes the mortgage.