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Avoid upfront fees for loan modifications

Avoid upfront fees for loan modifications

(Scams, Credit and Money Matters) Permanent link

You’ve probably seen ads from companies claiming, "We'll save you thousands on your mortgage." But what they don't tell you is that you’ll have to pay them a lot of money.

Like many people today, Lynnette was looking for a way to cut costs. She responded to a commercial for a law firm that promised to reduce her mortgage payments. The company also linked her with a costly debt consolidation program.

But after paying $6,000  upfront, she got no help at all and now faces the possibility of losing her home and declaring bankruptcy. Lynnette bravely agreed to share her personal story in hope that others can avoid being victims of loan modification scams. She joined Attorney General Rob McKenna today on New Day Northwest.

“They presented themselves very nicely … Once they got their money, I never heard from them,” she said.

 

The California-based law firm that Lynnette contacted for help has an “F” rating with the Better Business Bureau for failure to provide the promised services and reply to customer complaints. A blogger for MSNBC’s Red Tape Chronicles reported last year that a company advertisement encouraged car salespeople to apply.

If you’re facing foreclosure or having problems making your house payments, contact the Washington State Homeownership Information Hotline for free help at 1-877-894-HOME. They can refer you to a HUD-approved nonprofit counselor.

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.  (Attorneys must be qualified to provide legal advice in Washington.) If you choose to go with a loan modification business, verify they have a license by checking the DFI Web site or calling 1-877-RING-DFI.

Watch out for companies that:

  • Contact you.
  • Demand large fees upfront.
  • Claim ridiculously high success rates.
  • Ask for bank account information in order to withdraw funds.

The Federal Trade Commission is looking at a potential ban of upfront payments by mortgage relief companies. Under the proposed rule, companies could not be paid until they had a documented offer from a mortgage lender or servicer that lives up to the promises they have made. Seems like a good idea to me.

(A big thank-you to Lynnette and the counselors at the Washington State Homeownership Information Hotline and Parkview Services for making this story possible.)

Posted by Kristin Alexander All Consuming Blog Moderator at 06/22/2010 10:27:24 AM | 


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