Avoiding Loan Modifications ScamsFriday, August 01, 2008
Tips from Consumer Credit Counseling Service of Greater Atlanta
Challenging economic times, declining home values and skyrocketing foreclosure rates have homeowners looking for solutions to help them keep their homes. An appealing option for some is loan modification--which involves working with your current lender to alter the terms of your existing loan. A loan modification usually means your monthly payments are reduced, either by lowering the interest rate or extending the term of the loan.
"For homeowners struggling to make monthly mortgage payments, the opportunity to renegotiate the terms of their current loan may help them keep their homes," said Michelle Jones, senior vice president of counseling for Consumer Credit Counseling Service (CCCS) of Greater Atlanta. "Unfortunately, there are businesses that will take advantage of consumers' fears. Homeowners need to know that help is available from many HUD-approved nonprofit counseling agencies and they need to investigate any company that requires a payment for these services."
CCCS cautions consumers to be aware of some of the red flags of typical scams:
Guarantees - Be wary of any company that offers a guarantee of stopping foreclosure regardless of your circumstances. Keep in mind that oral promises and agreements relating to your home are not usually binding, so a guarantee in an ad or from their representative may be meaningless.
Up-front fees - Some companies charge a fee before reviewing your situation or making a single call on your behalf. Beware of any attempt to collect payment from you before providing a service.
Redirected payments - Do not agree to make payments to a third-party. Some scams involve having the homeowner pay a company with the promise that they will make your mortgage payments. If they fail to do so, you have lost your money and may still wind up in foreclosure. Always make payments directly to your mortgage company.
Buy-back or Lease-back plans - In this case, companies have homeowners sign over the deed to their home and then rent it back from the company. The terms of the agreement may require high up-front and monthly fees and failure to meet these terms may result in the loss of your money and eviction. It is important to note that transferring your title does not change your payment obligations--you are still responsible for your mortgage debt even though you no longer own your home.
Consumers need to be especially cautious of any attempts by a company to stop them from communicating directly with their lender, with an attorney, or with a housing counselor. They need to carefully read every document and fully understand what they are signing. Never allow the company to complete the paperwork for you or pressure you into signing a document you have not thoroughly reviewed.
Loan Modifications Are Available - Learn More
The federal government has developed a major loan modification and refinancing program to help homeowners find affordable loans and to save their homes. For more information on these federal mortgage modification and refinancing programs, visit www.makinghomeaffordable.gov.
While there are unscrupulous businesses looking to take advantage of homeowners, there are also many HUD-approved housing counseling agencies that offer help for struggling consumers. CCCS of Greater Atlanta provides free counseling for homeowners and helps them explore the options available to them. For homeowners that may qualify for a loan modification, counselors will offer tips on documents to have available and help them understand what they can afford. In some cases, the counselor will participate in a conference call with the homeowner and loan servicer to initiate conversation about a loan modification.
CCCS is a member of the Homeownership Preservation Foundation, a nonprofit organization that operates a 24-hour toll-free hotline to provide counseling for borrowers. The Homeowner's Hope Hotline number is 888.995.HOPE (4673). You can also get more information online at www.995hope.org.
About CCCS of Greater Atlanta
CCCS of Greater Atlanta serves clients in all 50 states and has 33 offices in four states. It is the headquarters for the CredAbility Network, a family of agencies serving consumers in north Georgia, south and central Florida, middle Mississippi and east Tennessee as well as nationally via telephone and Internet.
CCCS is accredited by the Council on Accreditation and is a member of the Better Business Bureau and the National Foundation for Credit Counseling (NFCC). Governed by a community-based board of directors, CCCS is funded by creditors, clients, contributors and grants from foundations, businesses and government agencies. Service is available at offices throughout metro-Atlanta and north Georgia in English, Spanish and American Sign Language. CCCS offers around the-clock help by phone at 800.251.2227 or at its Web sites, www.CredAbility.org and www.CredAbility.org/es.
Scott Scredon 404.653.8833, Scott.Scredon@CredAbility.org
John McCosh 404.260.3108, John.McCosh@CredAbility.org