Top 5 Steps to Avoid Foreclosure without Falling Into a Loan Modification Scam

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The sad reality is that an estimated 4 million households will lose their home to a foreclosure this year. Of course most of them will not go without a fight and will try to reduce their monthly payments with a loan modification.

Unfortunately loan modifications are not easy to come by and only a small percentage of troubled borrowers get a loan modification trial and an even smaller percentage get a permanent loan mod. This has created a practically brand new industry overnight, loan modification companies or consultants. This industry is not regulated allowing practically anybody to hang up a sign and start “working” as a loan modification consultant. This has caused many loan modification scams to crop up. This article aims at helping you avoid the scams and take the right steps to maximize your chances of loan modification success.

Step 1.

Contact your Bank or Lender first as soon as you realize you are going to struggle to make mortgage payments. It is always better to start planning for the worse before you are delinquent on your mortgage. You will need to contact your bank’s or lender’s loss mitigation department and explain your situation.

Step 2.

Be patient. Loan modifications take time and are difficult to get because a) they require plenty of paperwork and b) banks are not overjoyed with the prospect of losing money. However pressure is mounting on banks to stop dragging their feet and some lenders are increasing their loan modification completion rates substantially.

Step 3.

Contact HOPE’s hotline at 1-888-895-HOPE you will receive free help from trained counselors in multiple languages 24 hours a day. Although loan modification companies will tell you that these counselors are not good and that you need to pay to get a good service that has your interest at heart I recommend you give them a try. They are getting paid (obviously) just by the government instead of you.

You should also contact your local HUD approved counseling agency. You can find out where your closest office is by asking at the same hotline number detailed above. It is a good idea to visit a couple of counseling agencies and comparing the counsel they provide. The truth is that loan modifications are not THAT complicated, once you understand the basics and get down to the messy paperwork most people get ahead just fine. Getting approved, well that is just another thing altogether.

Step 4

Beware of loan modification scams. Here are some signals that give them away:

1) Avoid ANYBODY (lawyers, companies or consultants) that asks for a prior fee for ANY loan modification service. Besides being a bad idea for obvious reasons it is illegal in many states.

2) Avoid companies, lawyers or consultants that GUARANTEE your loan modification will be accepted or that they can stop a foreclosure. At best this is wishful thinking of a naïve consultant, most likely there are lies, in any case avoid like the plague.

3) Avoid companies that tell you to stop making payments on your mortgage and pay them instead, this is the litmus test of fraudulent loan modification agencies.

Step 5

If you see evidence of a loan modification scam, or of bad practice with a loan modification company, do us all a favor and report them to 1-888-995-HOPE (4673). Loan modification scams are spreading fast but the Government is working hard to put them out of business. Many District Attorneys’ are making it their mission to put these companies out of business.