Loan modification scams have been increasing steadily throughout the country, particularly in relationship to rising foreclosures in the housing market. In order to avoid foreclosure, many homeowners seek to modify existing loans. Consequently, these distressed homeowners are prey to loan modification scams. Moreover, loan modification scams also occur with other types of loans, including but not limited to automobile or education loans. Other foreclosure scams that have been occuring are forensic loan audit scams and foreclosure rescue scams.
How a Loan Modification Scam Works
Frequently, loan modification scams occur through an initial telephone call to the person who has the loan. Generally, the caller will offer to provide a loan modification service and request an up front payment via a credit card. However, sometimes a loan modification company’s representative will visit one’s home in order to discuss a loan modification. In either event, the representative will offer to renegotiate the loan on the individual’s behalf. Usually, the proposed negotiation is offered in exchange for a prepaid fee equivalent to at least one month’s payment of the loan amount. For example, if the loan modification is based upon a mortgage, the representative will offer to renegotiate the mortgage for an amount equal to one month of the mortgage payment.
Loan modification scams work in either of two ways.
- Loan Modification Scam - First, the work which is performed in the renegotiation of the loan is work which could be performed for free by a non profit organization or by loan modification assistance programs. Many states and local municipal agencies offer such loan modification assistance programs. Thus, the scam operates by allowing loan modification entities to get paid sometimes enormous fees to perform services which would otherwise be free of charge.
- Loan Modification Fraud - Secondly, the scam occurs where the loan modification companies simply take the prepaid fees and do not provide any services at all, resulting in loan modification fraud.
Legal Protection and Laws
Many states now have legislation aimed at preventing loan modification scams. These laws have helped to reduce the number of loan modification fraud cases which can also often be treated as Intrinsic Fraud. Furthermore, if one has been the subject of a loan modification scam, reporting the loan modification scam to criminal enforcement agencies, such as the local police department and the Federal Bureau of Investigation are all legal actions which can be taken. If you seek to modify a loan, you may seek to obtain the assistance of a loan modification attorney.
Help from a Loan Modification Scam Attorney
Such an attorney not only has the expertise in working with financial institutions, but also understands the intricacies of the industry. Moreover, the attorney is likely to have relationships with various entities in the industry, which can assist in the modification process for your loan. Finally, in the event that you have been the victim of a loan modification scam, a loan modification scam attorney can assist in directing you as to your specific legal rights and whether there is any legal recourse you have against the loan modification company. In addition, the attorney can advise you as to whether you may be able to take any action in order to properly modify your loan.
