Loan Modification - Avoid The Scams

Published: 07th July 2009
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If you are behind in your mortgage payments, you will be contacted by many people who will offer to provide a loan modification with your lender.

What is a Loan Modification? That is where you and your lender agree to modify one or more of the terms of your home loan. The terms could be a lower interest rate, an extension of the length of the loan (like making a 30 year loan into a 40 year loan), a conversion of an adjustable rate loan (called an ARM) to a fixed rate, the deferring of some of your payments, or any other modification of loan terms.

The goal of a Loan Modification is to help you keep your home and to give you a real, meaningful, sustainable, and long-term adjustment to your current home loan that works for your financial situation.

To avoid the scams that take your hard earned money, remember these rules:

Rule #1: Do not pay any upfront fees. After they have collected your money, what is their motivation to getting a successful loan modification in a timely manner. News story after news story have appeared in print, TV, radio, the internet and other news media of people losing their money to "loan modification" consultants.

Some state government websites, like California ( have issued consumer scam alerts regarding loan modification and foreclosure consultants. "California Civil Code Section 2945, which regulates "foreclosure consultants", forbids anyone who falls under the definition of a "foreclosure consultant", as well as a real estate licensee, from collecting any advance fees for these types of services if a Notice of Default has been recorded against your property"

Rule #2: There are no "loan modification guarantees". Each bank or lending institution has their own guidelines and policies. Successfully negotiating a loan modification include: a) knowing what paperwork the lender requires and how to prepare it, b)and presenting your case in terms that follows the policies of your particular lender. c)understanding your credit and how to improve it.

Also, each borrower's financial circumstance is unique and each bank or lender has its own loan modification policies and criteria, making it very difficult for any company to guarantee a loan modification.

Even then, there is a chance - not a guarantee - that your loan will be modified. That's because the rules and policies are changing, as new Federal regulations are introduced.

Rule #3: Never sign over your title. Legitimate advisers would never ask you to sign over the title to your home or ask you for power of attorney.

Rule #4: Remember Rule #1 - Don't ever pay any upfront fees.

On the other hand, there are some legit companies who do what they say they will do. But just be cautious while looking for help. This is a booming industry and there is a lot of greed. There are companies that offer a "no upfront fee loan modification program, where you pay only if they get results that you agree with. There are also State and Federal agencies that can provide assistance.


Do you qualify for a loan modification? Find out how on this website that offers a "No upfront fee loan modification program":

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