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Loan Modification Scams

If you’re behind on your loan payments, you may receive mailings from companies offering to help consolidate or modify your loan.  While the solicitation often looks official, beware!  These types of offers are often scams.

Loan modification scammers prey upon desperate borrowers. The solicitation is often from a company whose name sounds like it is affiliated with a government program. These companies employ common ploys to get you to call them and, once you do, they press hard to get you to sign up for their loan modification services. Here are some things to watch out for:

  • Doubtful claims and guarantees—The company may claim to have obtained successful loan modifications for 90 percent of its clients or may claim that it can stop a foreclosure process.  If it sounds too good to be true, it probably is.
  • Upfront fees—If a loan modification company demands a large upfront fee, run for the hills.  Once they get this from you, they have no incentive to perform any work and they probably won’t.
  • Suggestions to pay the loan modification company instead of your lender—The company will often suggest that you pay it’s fees rather than your loan payment.  Do not do it. They will take your money, obtain no loan modification, and you will just be further behind on your mortgage or other loan.
  • Recommendations to stop communication with your lender—Loan modification companies often advise you to stop communicating with your lender, but you need to keep the lines of communication open. Don’t just ignore your lender’s letters and phone calls.

Instead of falling prey to these loan modification scams, there are some ways you can protect yourself:

  • Contact the lender yourself—there is no secret involved to negotiating a loan modification, so contact the lender directly and ask for it yourself.
  • Investigate government modification programs—There are many government or proprietary modification programs you may qualify for, so look into those.
  • Work with a non-profit, HUD-approved counselor—You can get free foreclosure prevention counseling from a HUD-approved housing counseling agency.
  • Check with the Better Business Bureau or Virginia consumer protection agency to check up on a loan modification company.

If a loan modification company comes calling, exercise caution and consult with your Virginia debt management attorney to protect your rights.

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