Simple Tips to Avoid Loan Modification Scams

In my blogs, I like to focus on the great reasons for living in Reno and the Greater Reno-Tahoe area.  From time to time, I also like to keep you updated with the Reno housing market and real estate trends.  However, today, I am going to speak to homeowners in the Greater Reno-Tahoe area (and the rest of the nation) about loan modification scams.
 
Loan modification scams are afoot throughout the nation, especially in hard hit areas like Reno and Washoe County.  Distressed homeowners should be very careful when contracting with any company offering loan modification help.
 
Beware when:

    * A company contacts you first.  The point of any company in business is not to help you but to make money; proceed cautiously.  The only one that should be contacting you is your lender.  Homeowners who re one or more payments behind may receive a notification from their lender offering the homeowner a loan modification (at no charge).
    * A company charges an application fee.  Most likely, the application form is a company form, not an application for the loan modification.  You should never pay a fee just for filling out a company's application form.
    * A company asks for upfront fees.  Under the Making Home Affordable program, their loan modification service does not charge fees.  You are paying the company for their services.  You need to know what service they are providing for the dollars you will be spending.
    * A company guarantees a loan modification.  No one can guarantee that a loan modification will be granted, not even your lender.  You must go through a qualifying process.
    * A company guarantees a reduction in payment, loan balance and/or interest rate.  Because no company can guarantee that you will receive a loan modification, they cannot guarantee you will receive a reduction in your mortgage payment or your loan balance.
    * A company promises or guarantees a lower interest rate.  Because, no company can guarantee that you will receive a loan modification, they cannot guarantee that you will receive a lower interest rate.
    * A company is not a member of the Better Business Bureau, an attorney or a law firm.  It is up to you to be sure the company you are dealing with is reputable.  Do not believe their words, promotional material or provided testimonials.  Check out their credentials for yourself.
 
Be Aware:

    * There are many organizations which offer free help and resources.  MakingHomeAffordable.gov, Hope For Homeowners and various consumer organizations offer free help when applying for a loan modification.
    * You must qualify for a loan modification and have a source of income.  There a specific guidelines for qualifying for a loan modification.  You must meet qualification criteria to receive a loan modification.  You must show that you have a proven source of income with the ability to pay your modified mortgage payments.
    * Money back guarantees can also be scams.  Some firms will offer a partial refund if you do not receive a loan modification.  This is certainly fair, as the company has worked on your behalf.  Here is an example.  If a company charges $2,000, after a specified time expires (as per your contract), a loan modification is not achieved.  The company guarantees they will return $1,500 and retain $500 for services rendered.  Although loan modification scammers do little if any real work to help you, you still must pay for services rendered.  All a company needs to do is send a letter or two to met their "obligation" by law.  If a scammer signed ten contracts a week, that would equal to an income of $20,000 per month.
 
Remember, when you hire a company to help you with a loan modification, you are paying for representation and services, NOT a loan modification.
 
Bonus Tip:
When negotiating a loan modification, you don't have to accept the first offer made by the lender.  If your negotiating skills are not the best, then using a reliable and reputable loan modification service may be the best service you can do yourself.
 
Before entering into an agreement with a loan modification company, check out the many free resources that are available to you.

    * City of Reno Distressed Homeowner Resources - A list of various local and national organizations offering resources and help.
    * Nevada HUD Approved Housing Counselors - A list of counselors (paid and free) which offer loan modification services.
    * Making Home Affordable - Eligibility tool, FAQ page and resources.
    * Nevada Foreclosure Information Workbook - This booklet is a great resource offering information and forms
 
Charlene Hamlton, your Reno relocation specialist