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Government Warns: Mortgage Modification Scammers Still Going

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We’ve written about scammers offering to help people avoid foreclosure, when really their only goal is to steal money using up-front fees. Now the federal government is getting serious about cracking down on them. The Consumer Financial Protection Bureau and the Treasury Department announced Thursday that they are creating a new task force to shut down foreclosure scams and educate consumers on how to void them.

“Mortgage scams harm not only homeowners but legitimate businesses and the market as a whole,” Richard Cordray, the bureau’s enforcement chief and President Obama’s nominee to become the agency’s first permanent director, said in a press release.

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The scams are usually pretty simple. In return for an upfront fee, scammers posing as lawyers, mortgage experts and foreclosure specialists claim to be able to help homeowners fight the banks and get out of foreclosure, often by exploiting loopholes in the law.

The simple act of charging a fee in advance for mortgage modification services is usually illegal, according to the task force. And beware companies that offer money-back guarantees, says the task force, since in most cases they won’t follow through on the promise.

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Besides, in nearly all cases, such offers are lies. Only the servicer of your loan has the power to change it, so anyone else who promises they can get you a modification is being disingenuous.

It’s true, some people were able to prove in court that their original mortgages included deceptive statements that added up to fraud, and had those loans forgiven. But such cases were rare. And now, few people can bring such lawsuits because the statute of limitations has already run out, says Todd Allen, the Florida lawyer who successfully foreclosed on a Bank of America branch.

[Related Article: Keeping Banks Honest: Protect Yourself During Foreclosure]

In addition, you don’t need to pay anyone to help you apply for a loan modification. The applications are free, as the new task force points out. Simply call this government hotline, 1-888-995-HOPE (1-888-995-4673) or fill out an application online at the Home Affordable Modification Program’s website, www.MakingHomeAffordable.gov.

If you believe you may already have fallen victim to a mortgage modification scam, you can report it to the government by calling this hotline: 1-877-SIG-2009 (1-877-744-2009).

Image: TheMuuj, via Flickr.com

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