Avoiding Fraudulent Loan Modification Programs

A recent study indicated that over one out of every ten mortgages in America either is behind on payments or is already in the process of foreclosure. With millions of homes at risk of foreclosure, it is easy to see why there are so many people, companies and agencies that claim to able to arrange a loan modification plan that will keep the homeowners in their homes. Many of these are legitimate and can in fact be very helpful to the troubled homeowner. Unfortunately, many are not at all honest. Rather, they only seek to make a fast profit out of your financial problems.

Some of these shady operators are actually operating in a legal, or near legal, way. The whole subject of foreclosure is complex and most Americans that are facing foreclosure are doing so for the first time. This means that they really don't have a clear understanding of the legal issues involved. Read on for some things to be on the lookout for when seeking help from a "loan modification counselor".

A legitimate loan modification counselor will not ask for money up front. There are many government agencies as well as legitimate non-profit agencies out there. For their help you usually don't have to pay, and never anything up front.

How long has the firm been at the current address? A common tactic is to advertise heavily, and take as many "retainers" as possible before closing up and moving on the next place. They offer no help whatsoever and are hard to find, especially at a time when you have other things to worry about.

Be wary of firms that claim to be able to induce your bank to modify the terms of your mortgage. They take your money up front and make the call to your bank. Your bank declines to cooperate but you are already out the money you paid. They knew from the beginning that they were going to be unsuccessful. After all, your bank is likely to offer a modification plan directly to you, if you were qualified for it.

If you have equity in your home and just cannot seem to make the payments, be especially careful of the company that offers to buy your house. They offer to buy it so you can pay-off the mortgage, then rent it to you so you don't have to leave your home, and they say they will offer it back to you, at essentially the same low price, later when you can afford it. The problem is that they will have sold it elsewhere at a higher price and the new owner has no obligation to sell it back to you.

Not all self-help books or paid seminars are scams to be sure. However, they mostly paint an overly simplified picture. You have seen the TV ads. The process of foreclosure prevention is not nearly as easy as they make it sound. Sure, they don't take any money from you for arranging anything but you, and the entire audience, has none-the-less given some of your valuable time and money to receive advice that is essentially impractical , or even worthless.

Several avenues do make sense. Consult with a well-known non-profit organization, or an agency of the federal or state government. Their advice is free and very likely to be much more useful to you than the advice for which you had to pay.