Mortgage Modification Scams And Ways To Avoid Them

One of the worst threats that lingers in the back of the minds of many homeowners is the threat of foreclosure. Unanticipated problems such a medical bills, a death in the family, a divorce, or the loss of a job can interfere with a homeowner’s ability to make their mortgage payments. It often takes years of savings and hard work for you to build up your dream home, but all it takes is a few missed payments on your mortgage loan to lose it, and because  a foreclosure can be a nightmare, people are more likely to fall for some of the scams out there that claim to help you avoid foreclosure because they’re willing to try almost anything to avoid this nightmare.

This article tells you about 5 of the most common foreclosure scams you’re likely to encounter and also provides you with some tips on how to avoid them.

modification loan scam

Alachua County / via Flickr

 

Equity skimming

 

This is the scam when a “buyer” offers to get you out of your financial troubles by promising to give you money or pay off your mortgage after the property is sold. The “buyer” might also ask you to move quickly and deed the property to them, but after you’re out of the home the “buyer” begins collecting rent on the property without paying any mortgage payments. They do this all the way until the lender forecloses on the property. Signing over the deed of your property to somebody else doesn’t remove your obligation on the loan.

 

Phony counseling agencies

 

There are some groups out there who are referring to themselves as “counseling agencies”. Usually after they approach you they offer to perform certain services for free. These “free” services are most often services you could do for free yourself, like talking to your lender about negotiating a new payment plan or going after a pre-foreclosure sale. So, if at any time you are approached by one of these “agencies” and have some doubts about paying for their services, contact a HUD – approved housing counseling agency at TDD 1-800-877-8339 or 1-800-569-4287. Make sure you contact them before you pay for anything or sign anything.

 

Lender scams

 

As sad as it sounds, even lenders are guilty of participating in foreclosure scams. The way a lender scam works is a lender offers you “help” by refinancing your loan with lower monthly mortgage payments. At first your payments will be a lot lower than the payments that you were making because all that you’ll be paying is the interest. However, when the end of the term rolls around you’ll have a huge total amount you will need to pay in a lump sum (this type of payment is referred to as a balloon payment). You’re likely to lose your home to your lender if you are not able to make the entire balloon payment.

 

Loan flipping

 

This is another scam lenders use. In this scam your lender might offer you the option of refinancing your loan for some extra cash. Then, after you’ve made some payments on the refinanced loan, your lender will offer you the option of refinancing your loan again for some more cash that you can use for renovations and vacations. What your lender doesn’t tell you is that repetitive refinancing is a big risk factor for going into debt and that repetitive refinancing can lead to higher interest rates, added fees, and prepayment penalties.

 

Internet and phone scams

 

Internet and phone scams usually come from “con lenders.” These con lenders get you to apply for a “low interest” mortgage on the internet or over the phone. They use the application process to extract personal information from you, such as your social security number and bank account information. In this scam, they always approve you for a loan almost immediately. After they approve you they will get you to start faxing them documents and sending them wire transfer payments. However, this is a phony company and not an actual lender. Not only does this scam compromise your personal information, your home is still at risk for being foreclosed upon.

 

Phony loan transaction

 

A phony loan transaction involves you being introduced by a lender to a refinancing loan document that is supposed to bring your neglected loan amount current. What this “loan document” actually does is transfer the title of your home to the company’s name for a fraction of its value. Oftentimes the terms of the loan will include balloon or interest only payments, immediate rate adjustments, huge fees, and prepayment penalties.

 

Facing a foreclosure is a big problem, but getting taken by a foreclosure scam makes the problem bigger. So, it’s important for you to guard yourself against foreclosure scams as you’re in the process of trying to avoid a foreclosure. The best ways you can protect yourself against foreclosure scams are listed below:

 

  • Know what you’re signing – Carefully read and understand every document that  you’re signing
  • Get promises in writing – Don’t accept oral agreements and promises that involve your home because they are not usually legally binding. You need to protect your rights with written documents or contracts
  • Consult a trusted expert before signing over your deed – In many cases, a foreclosure scam will involve the transfer of ownership to a third party. Don’t ever agree to a title transfer without first considering advice from your lawyer, credit counselor, or financial advisor. You lose your rights to  your home when you sign over your deed, but you still are obligated to satisfy the terms and conditions of the mortgage
  • Make all mortgage payments directly to your lender or mortgage services – You shouldn’t trust anybody to make mortgage payments for you
  • If you need help, only ask legitimate housing or financial counselors for assistance – You can find HUD – approved housing counselors at 1-888-995-4673

 

Here at 123soldfast we know how difficult it is for homeowners who are in danger of a foreclosure and we have helped many homeowners who were in this situation. So, give us a call at 713-322-3861, and we’ll be happy to assist you!

 

Leave a Reply

Your email address will not be published. Required fields are marked *