14 Red Flags of a Loan Modification Scam

I read the disturbing report from the Department of Real Estate on the scams that loan modification companies are pulling on homeowners in need. It is so hard to see through the smoke and avoid these people.
I have compiled a list of 14 red flags that warn of fraud when it comes to loan modification companies. As a member of Modern Debt Relief, you have the peace of mind of knowing that all listed providers have passed a background check and have the necessary licensing and credentials to provide the services you need. Share these red flags with those you love and care for and refer them to www.moderndebtrelief.com for reliable resources.

Red Flags of a Loan Modification Scam

1. Demand for payment up front
Be wary of loan modification companies who demand payment up front. This is the first sign that fraud may be in action. Only licensed real estate brokers can perform loan modification and charge you in advance before a Notice of Default is recorded. But this payment must be authorized by the Department of Real Estate (DRE) and held in a trust. Licensed lawyers who offer loan modifications as part of their practice as an attorney at law may also charge a retainer. However, be sure to get a written fee agreement before paying a retainer.

2. Unlicensed Agents or Company
The agent must have a Department of Real Estate (DRE) license or be a lawyer or firm that specializes in real estate.

3. Guarantees of Success
We see the extraordinary claims all over the media: “We will save your home” “We can lower your principal” “Money Back Guarantee”. None of these claims can be guaranteed, and are used to lure in unsuspecting and often desperate home owners in danger of losing their home. No company can guarantee the outcome of a successful loan modification.

4. Unrealistic Testimonials
When you visit the company’s website or sit down with a rep, you may be given unrealistic testimonials. Any fantastic claims to have lowered the interest rate below 4% or reduced the principal balance on the loan by 40% are just too good to be true. Don’t fall for it. This is just another tactic to reel you in with false promises.

5. “Attorney-Backed” Companies
If you are not dealing directly with a law firm, stay away from companies claiming to be attorney-backed or attorney-affiliated. Many of these companies are looking to gain credibility by associating themselves with a lawyer. Avoid the probable headache and seek help elsewhere.

6. Request for Power of Attorney or Title
Do not grant the loan modification company power of attorney or transfer the title of your home into their name. They may abuse this power and sell your home without your consent for their profit. This sounds atrocious, but it happens.

7. Rent to Own
This involves transferring title to the company or third party with the arrangement to lease back the home from the company. This may sound good because you can stay in your home for a lower payment and rebuild your credit. Be wary. As in #5, the scammers may evict you and sell the home from underneath you.

8. Payments to Someone Other Than Your Lender
Be suspicious if your loan modification company sets up payments to anyone other than your home loan lender. This is not a viable practice.

9. Forensic Loan Reviews
Be wary of firms that claim to put pressure on your lender by filing suit or bankruptcy.

10. Signing Lot of Forms
If a company gives you lots of forms to sign and skim over the pages, telling you where to sign without encouraging you to read or explaining the document, be cautious. You must read and understand the documents before signing them to avoid scams.

11. No Time to Meet With You
If a company is too busy to sit down and meet with you, do not do business with them.

12. Instructions to Deal With Only Them
If your loan modification provider advises that you not contact your lender, non-profit counselor, or any other professional, raise the red flag. They are keeping you guarded from sound advice and counsel.

13. Promoting Delinquency to Improve Success
It is not good practice to advise clients to miss payments to improve the chance of a loan modification.

14. High Pressure
Do not cave in to high-pressure sales tactics. You do not have to “act now” or else. When dealing with your home, it is best to proceed with caution or deal with a qualified professional or agency. High urgency to act or to pay is a red flag for scam. You need time to investigate their credentials and licensing.