Loan Modification Company Scams How to Avoid Them

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The las loan modification company to have been hit by the Government is Debt Relief USA. Texas Attorney General Gregg Abbot is set to recover $4.6 million for former customers of Debt Relief USA, an Addison based company that filed bankruptcy earlier in June.

Debt Relief USA claimed, as so many other companies, to help consumers to reduce debt and monthly mortgage payments. The idea was that Debt Relief USA would use its expertise in the sector of loan modification to get a better deal for customers.

Besides the illegal business practices Debt Relief USA carried out with its customers before bankruptcy the company collected set aside money from its customers as part of the bankruptcy process. This is of course not legal. Attorney General is working to change the bankruptcy to a liquidation. AG Abbot is also seeking to enforce penalties for deceptive trade practices. Debt Relief USA had 2,500 companies which according to AG Abbot did not receive the help they paid for.

What can you do to avoid Loan Modification Scams?

Let us start by reassuring you that loan modification online can be helpful and even save you money. However if you use the wrong company you could end up in the street earlier than you thought.

There are a few signs you can spot early on to know if you are dealing with a scam artist when buying a mortgage:

1) They promise you, you will save money by reducing your debt capital. This is an impossible promise to make because it does not depend on the loan modification consultant. Banks are the ones that revise and decide on these applications.

2) They ask you to stop paying your monthly mortgage payments and to use that money to pay them. This is more common than you would expect. Before you know it you are months further in debt with nothing to see for it. The loan modification company might ask you to pay up front to get the things started. It is illegal to ask for payment for work that is yet to be done so say no to this practice.

3) They cold call you and promise you have been pre-approved. This is a very popular trick as it targets those what are so in debt they are struggling with and are less likely to a second check.

4) The government has set up advice centers that provide information for free. It is often the case that these free information providers are better than any paid for loan modification consultant. Many borrowers follow the common sense idea that paid for services must be better than the free ones but in this case it is more often than not a mistake.

5) They promise you your credit score will not be affected. If a loan modification consultant tells you that just run for the door and go home, or if they cold called you hang up. Banks only modify their loans if people can’t pay or are struggling to pay their loans. In order for a loan modification of this type to go through you need to tell your bank you can’t pay what you borrowed. Your bank is then obliged by law to report you and of course that will hit your credit score pretty badly.