Loan Modification Scams Preying Upon California Homeowners

The California Department of Real Estate (DRE) reports that hundreds of individuals and companies continue to take advantage of homeowners in desperate need of financial assistance to save their homes. In 2009 alone, the DRE filed almost 600 punitive actions against these scammers, and hundreds more have been filed so far this year.

The cons ensnaring consumers share several common elements, including a demand for an upfront fee (this is in direct violation of California law, which now makes it illegal for attorneys, real estate licensees, foreclosure consultants and others offering loan modification/renegotiation services for profit to ask for fees upfront) and offering a guarantee of success. Once the fee has been received, often no action is taken by these cons to help the homeowner. Some companies seemingly disappear, but some use more elaborate measures, providing false documentation to the homeowner and offering to be a "middleman," promising to accept the monthly payment and passing it along to the mortgage lender.

Oftentimes, the homeowner will pay the fee for services and find themselves unable to contact the company - some particularly unscrupulous companies will actually change their name and/or telephone numbers in order to continue the scam more and more innocent victims without fear of being discovered.

Luckily, there are ways to avoid being ripped off when seeking a mortgage modification:

  • Do not pay an upfront fee
  • Research the background and credentials of the company, making sure that they are licensed as a real estate broker or attorney
  • Avoid falling into the trap of paying for a "forensic loan audit" - California does not recognize a specialization in forensic loan auditing, mortgage loan auditing or forensic attorney-back foreclosure prevention loan auditing
  • Take advantage of free modification/renegotiation services such as those offered by the U.S. Department of Housing and Urban Development (HUD), the Making Home Affordable Program or the HOPE NOW alliance

If you are a homeowner needing loan modification or refinancing assistance in order to prevent foreclosure, you can increase your chances of success by seeking the assistance of an experienced real estate attorney in your area.

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