Spotting loan-modification scams
Many newspapers and television stations have reported on loan-modification scammers, people taking money from homeowners who can least afford to be flimflammed. But it's still happening, so the word hasn't reached everyone who needs to hear the message.
Here's an effort to fill in gaps: Loan Modification Scam Alert, a website run by community revitalization nonprofit NeighborWorks America. The site offers "6 Things You Should Know" (for instance, paying an upfront fee to a company for loan-mod help may get you nothing but further in the hole), a list of common scams, people's scam experiences and the like.
It's illegal in Maryland for a loan-modification company to charge upfront fees, so, yeah -- definitely a red flag. The state Department of Labor, Licensing and Regulation has been issuing cease-and-desist orders to operators as part of a nationwide crackdown. You can read more about that effort here.
But don't heave a sigh of relief: As a Salon piece from September notes, it's "a giant game of whack-a-mole," with cracked-down-on companies finding ways to continue operating and firms using loopholes to get around state laws banning the collection of upfront payments. Many states have an exemption for attorneys, and -- alas -- attorneys are involved in some of the companies under fire. (On the other hand, about 1,000 attorneys in Maryland have signed on to an effort to help borrowers for free.)
Whom should you call, then, if you're hoping you qualify for a modification of your mortgage? The company that services your loan -- that's the firm asking for your payments every month. Or the state's HOPE hot line, 877-462-7555, which will refer you to a nonprofit housing counselor. Or connect with a housing counselor directly -- the HUD-approved list of agencies is here.