Some good things are going on in the economy these days: The stock market has been hot lately, the economy added 288,000 jobs in June and the national jobless rate dropped to 6.1 percent.
Yet there are still plenty of Americans who need financial help, especially with their mortgages. These people are vulnerable to predators.
Barbara Floyd Jones of national homeownership programs at NeighborWorks America said that loan-modification scams are on the rise. And they often work, because people don’t know much about loan modification.
Floyd Jones took to the streets of the District of Columbia to see what people knew about mortgage modifications. She asked people how much would they be willing to pay to have their mortgage changed. One person said he would be willing to pay $10,000 to $20,000.
“I don’t even know if I would have the money to actually do a loan modification,” another man said in a video at bit.ly/1xUTJpk.
One woman said she would be willing to pay “whatever it would take to keep my home, especially if I’m in foreclosure.”
But this is what they didn’t know: It is illegal for a company to collect upfront fees for mortgage-relief services.
Under the Federal Trade Commission’s Mortgage Assistance Relief Services rule, companies pitching foreclosure rescue and loan-modification services cannot collect fees until they have provided a written offer from a lender or servicer that the consumer accepts. Homeowners also must be given a written document describing the key changes to the mortgage that would result if they accepted the offer.
Many people are willing to pay because of persuasive advertising for foreclosure rescue and mortgage-modification services. The companies are taking advantage of the fact that many homeowners are still not getting relief through federal and state programs to speed refinances and modifications.
Scammers tend to look for:
• A borrower who is behind on mortgage payments and wants to see if he qualifies for modification.
• A homeowner who is making mortgage payments on time but is worried she can’t keep up.
• Borrowers who are not having trouble paying their mortgages but they owe more than the homes are worth. They don’t have to move. They don’t have to refinance, but they want to take advantage of lower rates and are frustrated that they can’t. They feel entitled to a modification.
NeighborWorks America recently urged homeowners to avoid paying for a loan modification or to stop a foreclosure. More than $93.6 million has gone to these scammers, according to the Loan Modification Scam Prevention Network, which includes NeighborWorks America. The average loss was $3,287.
Last month, the Obama administration said it would extend its Making Home Affordable program through 2016. That will likely resurrect some scams, said Douglas Robinson, a NeighborWorks America spokesman.
Here are some signs you are about to be scammed, according to NeighborWorks America:
• You are asked to pay a fee in advance to modify, refinance or work out mortgage issues.
• You are guaranteed that the company can stop a foreclosure or get your loan modified.
• You are told to stop making mortgage payments and/or send the money to the company.
Don’t believe people who say you can’t get a loan modification unless you are behind on your mortgage or that you have to stop making payments. Free help is available from a HUD-approved housing counseling agency. To find one, call 888-995-4673.
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