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Valley Short Sale Expert
Lauren Nemeschansky
Remax of Santa Clarita short sale
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Loan modification scams to avoid

Loan Modification Scams
Short Sale, Loan Modification, Short Sale Realtor

Beware of loan modification scams. You should never have to pay an upfront fee, it is illegal. However, many “professional “loan modification companies may tell you that they do not charge a fee unless you are found to be qualified and are granted a loan modification offer. Realize that an offer for a loan modification is different than you accepting a loan modification.

Loan modification company scams

If you do decide to hire a professional loan modification company or law firm make sure that they will not charge you money in any form or a service or a transaction fee unless you ACCEPT the loan modification that is offered by the bank. In all fairness a loan modification takes a lot of work to complete and if a company delivers what they promise then they deserve to get paid.

Real estate agent and Real estate company loan modification scams

Beware of certain real estate companies who tell you that they will complete your loan modification for you and do all the work for free. Completing and processing a loan modification takes several hours of paperwork and follow up phone calls to be done properly. Remember the old saying, “There is no free lunch” and often there is often a hidden agenda that those companies are not working for your best interest but are the hook that is part of a larger scam. Free assistance in helping you to do your own loan modification can be obtained by contacting either me or HUD counselors.

Lawyers and law firm loan modification scams and scams to stop a foreclosure

Beware of companies, usually law firms, who claim that they can stop a foreclosure or lower your payments. The most that any legitimate company can promise you is that they will try.

Beware of a company that tells you that for a monthly fee they will stop a foreclosure. I have been approached by several law firms who told me that they will stop a foreclosure if my homeowner clients pay them a monthly fee rather than make their mortgage payments to the lender. Some of them offered to pay me a “referral fee” for sending them my clients. It is an illegal practice and a scam. Most banks and lenders will postpone a foreclosure date while they are negotiating a loan modification or a short sale. They will not guarantee that will happen but usually is does and you do not have to pay one penny for that.

Loan modification scams where you are asked to stop making your mortgage payments

Beware of a company that tells you to stop making your mortgage payments. They may have a hidden agenda such as preparing to purchase your home at a foreclosure auction.

Loan modification scams where you are asked to sign over the deed of your home

Beware of a company that tells you to sign the deed of your home over to them and they will take over your payments while trying to “help you.” Never allow that to happen, signing away your deed does not relieve you of your mortgage debt at all.

Loan modification scams where you are told that the company will rent your home back to you

Beware of a company that offers to purchase your home and rent or sell it back to you. This is highly illegal and more often than not you will both lose your home and end up being responsible for debts incurred on it.

Loan modification scams where you receive an official looking “government approved” offer

Beware of a company that appears to be a “government” or “government approved” organization. They will send you very “official” looking mailers but they are more often than not a scam. I received such an official looking government notice in the mail that I was chosen by the US Government to “modify” my loan and lower my interest rate but it was a scam conducted instead by a private and unethical mortgage broker The only government approved organization you should work with is HUD and a HUD approved counselor who they will send you to after you contact HUD directly. Many of these scams target Veterans who hold VA loans but will go after anybody who has a mortgage and especially those flagged on public record as being in default.

Loan Modification scams where you are contacted and asked to release personal information

Do not release any financial or personal information to anyone other than your own lender or the certified HUD counselor who you are working with. If you are contacted by anyone claiming to be a HUD approved counselor or your lender ask them for a name and phone number so that you can call them back after you verify their identity. You should then call HUD directly and or your lender customer service and verify the phone number and name of the person who contacted you. The person should not get angry because they do understand there are many criminals who misrepresent themselves to homeowners for illegal purposes.

Loan modification scams where you are offered free loan modification help in exchange for a listing agreement

Do not sign a “listing agreement” or “pre listing agreement” contract of any kind to sell your home or promise to allow them to sell your home with anyone offering to do a loan modification either free of charge or for a fee. This may seem obvious to you but I get calls from regretful and often panicked homeowners who have already done just that.

It would be a waste of money to contract with a “professional”, to get you a loan modification and have to pay them , anywhere usually between $2500-$5000 for often very mediocre results or be charged a transaction fee for not accepting the loan modification because it does not meet your financial needs. There are some good loan modification companies out there, unfortunately many are scams.

List of some of the types of loan modifications

Below is a list of some of the types of loan modifications that have been offered by the lenders to homeowner clients of mine. Some of these modifications were the result of a “professional” doing the loan modification and others were offered to those who did the loan modification themselves. You will realize that some of these “modification offers” were not worthy of acceptance by the homeowner nor should they be required to pay a company or law firm a fee for these types of loan modification results:

  • A modification that significantly raises their loan balance
  • A modification that lowers their monthly payments but has a large balloon payment years later
  • a loan modification that actually raised their monthly payments rather than lowered them
  • The lender explained that although the monthly payments are higher that more of the payment is going to equity in the home rather than interest thus it is a better type of loan. Not very helpful if you are already having problems making your mortgage payments
  • A loan modification that only lowers their monthly payment a minimal amount
  • A loan modification that is only temporary, usually 3 or 6 months in duration. They are often called trial periods. If you are offered a trial period find out if the rate will be extended if you make all your payments on time and follow the rules of the trial. Sometimes they will extend the terms but other times they do not.

You do not want to be required to pay a fee to a loan modification company if the loan modification you are receiving may be revoked or increased after only a few months. Check also that you are not waiving any rights that were part of your original loan prior to accepting the trial terms. Prior to signing any sort of agreement for a loan modification company to represent you, make sure that you only have to pay a fee if you choose to ACCEPT the loan modification and terms.

Be aware of these loan modification scams and report unethical behaviors to protect others

A loan modification may be an excellent alternative to foreclosure or the need to short sell your home because you need to lower your mortgage payments. Now that you are aware of the scams and problems associated with a loan modification or unethical loan modification practices I hope that this information will be used to protect you as the homeowner from some of these misfortunes. These are common problems and if you do encounter them you can report the company or individual to the Board of Realtors or the State Bar depending on the type of license that is held. Please do report unethical loan modification practices so that you can help others and put those companies or individuals out of business.

There are simple steps to requesting your own loan modification form your lender which can be followed free of charge and with the same results as hiring a loan modification company.

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Contact Information

ReMAX of Santa Clarita
Valley Short Sale Expert
25101 The Old Road #232
Santa Clarita, Ca 91381

Phone: 661-310-8215
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About Lauren

REmax real estate agent
Lauren Nemeschansky is a REMAX
Real Estate agent serving
all of Santa Clarita,
Valencia, Stevenson Ranch,
Saugus, Canyon Country,
Newhall and Castaic.
San Fernando Valley and Los Angeles
HAFA short Sale Expert
CDPE certified real estate agent
M.S. Degree from California State University, Northridge
Real Estate License DRE#0172935:

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Short Sale Realtor Serving: Santa Clarita, Valencia, Stevenson Ranch, Saugus, Canyon Country, Castaic, Newhall
Copyright © 2013 All Rights Reserved. Valley Short Sale Expert, Lauren Nemeschansky
Lauren Nemeschansky is a Licensed REMAX Real Estate Agent DRE#0172935       Google
All information provided is deemed reliable but not necessarily accurate, neither Lauren Nemeschansky nor REMAX of Valencia shall be held liable for any inaccuracies or results thereof. This website and the information provided herein is for general educational purposes and is not meant to provide solutions for debt or mortgage problems or substitute for the counsel of a professional. Distressed homeowners are recommended to seek the advice of an attorney and tax professional. All rights to the content of this website are reserved and shall not be sold, duplicated, used or published in any manner without the express and written permission of Lauren Nemeschansky