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January 28, 2010

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.

Comments

Lady, are you serious? "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..." Are you just making things up and spouting them off? Have you ever tried to call the lender and have them help you? I have and so has everyone i know...not one has gotten anywhere! other than 8 mnths of run around and the HOPE line...thats a joke. Do everyone a favor and dont give out false hope and lousy advice.

Alas, Jeff, I wish there were a number for people to call for guaranteed help, but there isn't. (Guaranteeing success, in fact, is one of the scam red flags.)

Some people have had success dealing directly with their servicers, but it's usually a long, hard and very frustrating process. That's why homeowners are turning to housing counselors for help navigating through the process. Groups like St. Housing Housing Aid Center in Baltimore report that it's a long, hard and very frustrating process for them, too, but having a good counselor on your side can make a difference. I've been writing about the foreclosure mess since it began, so I've heard it from a lot of folks.

Best of luck to you.

You won't get a loan mod if current on the mortgage. Ask to speak to the loss mitigation department. Also you must be employed to qualify and still provide income docs. Go on Fannie and Freddie website to see if you are eligible for their loan mod program. If your loan is not owned by either, then it's the servicers discretion to approve or deny. Also, millions of people are doing this on their own. There is no need for a third party unless you are going to file a bankruptcy. A bankruptcy filing will compel the lender to cooperate and often times the second lien is wiped clean if underwater.

Good advice Frank. The loan modification process is a very very long one. I have seen them take over a year and six months is probably on the low end of the average time frame. You must be patient on one hand but persistent on the other. This is definitely a case of the squeaky wheel getting the grease. You must get them what they ask for as soon as possible. You should fax things to them multiple times as things have a way of getting lost. Print your loan number on the top of each page as well. Hang in there also!

Frank and Chipr are absolutely correct! You don't need a third party as 95% of them are loan officers who can no longer make it in the business for one reason or another and are looking for a quick buck. All you need to be is very very persistent. Hang in there and keep sending them what they ask for and stay on them. They are lots and lots of gov't or free services to help those in need of modification or short sale help. It will not be easy and anyone who says that it is quick or easy is someone to be wary of.

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About Jamie Smith Hopkins
Jamie Smith Hopkins, a Baltimore Sun reporter since 1999, writes about the regional economy. Her reporting on the housing market has won national and local awards. Hopkins is a Columbia native and has lived in Maryland all her life, save for 10 months spent covering schools in Ames, Iowa.
She trained to become a wonk by spending large chunks of time as a geek and an insufferable know-it-all.
Baltimore Sun articles by Jamie
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