Government Fight Against Loan Scams

Loan modification is a form of financial transaction where the property owner and the lender change or modify the current mortgage. This type of service is offered for those who are in dire financial status and badly needed financial aid.

Instead of letting the property go into foreclosure, the lender and the property owner make significant changes in the terms and conditions of the mortgage in favor of the property owner. Through this transaction, both party gains an advantage – the property owner will avoid foreclosure while the lending company will not have to sell a foreclosed property at a very low price than the current principal.

This type of transaction could be done directly with the lending company. But a common practice today is to seek the aid of a 3rd party negotiator so that proper documentations are prepared. Through their help the best modification loan possible could be achieved.

But these 3rd party companies who promises results in loan modification negotiation could be a scam. Recently, the government has announced their assistance in loan modification by providing subsidy for lenders who would provide loan modification option for the debtors.

Because of this announcement, scammers who pose as loan a modification company will convince property owners facing foreclosure to work with them for a fee. But the results are not guaranteed which means even though the lending company will not be convinced to provide loan modification to the debtor, the debtor still has to pay thousands of dollars in fees. Although there are legitimate 3rd party negotiators around the country, they always provide results.

The government, on the other hand has tapped different government agencies regarding this type of fraud. The following government agencies are now working to prevent and apprehend scam in loan modification:

• Justice Department
• Federal Trade Commission (FTC)
• Department of Housing and Urban Development
• Financial Crimes Enforcement Network

These agencies are tasked to inform property owners regarding this fraud which could cost you thousands of dollars without any result.

To Pay or Not to Pay

The number one sign that the loan modification company is a fraud is the requirement for upfront payment. These companies will convince the property owner to transfer some funds so that the transaction could be initiated. The amount is very alarming – the usual charge of these scammers could reach $3,000 depending on the loan amount.

But this should not be the case; there are 3rd party negotiators who will be more than willing to work with property owners and ask for a fee after the transaction. They would only ask for payment for their services if the negotiation is successful.

That is why legitimate companies are not usually your telemarketers who aggressively look for clients. These companies choose who they want to work with since they want to make sure that they could provide results for their business.

On the other hand, there are non-profit loan modification organizations that could help you prepare the right documents for this form of financial transaction.

For example, the Department of Housing and Urban Development’s Hope for Homeowners is a non-profit organization specifically created for loan modification.

The Word “Hope”

Aside from the upfront fee from this type of companies, also look out for companies that use the word “Hope” as part of their company name. This is done to create an illusion that they are actually part of the government and non-profit arm to provide loan modification assistance. These scammers can easily trick you so that you’ll be forced to pay a fee for their assistance.

If you think you have been scammed, never hesitate to contact these government agencies. Their offer might sound good but the result is often next to nothing.