Should You Be Wary of Loan Modification Firms & Forensic Loan Auditors – YES

Scammers, spammers and cheaters come out of the woodwork, aka “wolves in sheep’s clothing”, whenever there is an opportunity to take advantage of people who are in real need of help. And the downturn in the housing market was no exception.

There have been countless individuals, organizations and even attorneys that  have preyed on those people who found themselves in a position of losing their homes. The “I can get your loan modified”,“get your loan balance reduced”, “save your credit”, “I know the lenders”, “I have experience doing this”, all in the name of “give me $$$ upfront and watch me go to work.

Desperate people during hard times put their trust in almost anyone who they believe to be trustworthy. And why not, if they have credentials expressing their successes rates with testimonials and especially those with law degrees. The key, which is now being exposed is the asking for money upfront to perform these services.

While the FTC is cracking down on these requirements as to what is legal and what is illegal, unfortunately many millions of dollars have gone to these unscrupulous individuals with little or no results for the homeowners.

Starting January new rules are in place to ban all upfront payments, institute mandatory disclosures and enforce restrictions on attorney’s who participate in the modification schemes. Anyone claiming to be a legitimate organization must contact your lender, negotiate the new terms and provide you with a written proposal as to what will take place.

Let’s also address the “Forensic Audit” Buzz. This is another way to get money by running audits on mortgage loans to check if all loan documents comply with state and federal laws. These companies state if there are errors they can be used to get your lender to modify the loan, stop the foreclosure or in some cases eliminate your mortgage loan all together.

According to the FTC this is far from the truth and even if there are errors and you sue your lender, the lender is under no requirement to modify the loan. California’s law AB2325, effective January 2011, requires all forensic audit firms to register with the Department of Justice and prohibits the collection of any upfront fees prior to the audit.

While there are legitimate firms who can work with you to modify your loan, the advice is to verify their credentials.

  • Do not pay any upfront fees to any organization
  • Check for references
  • Stay in communication with your lender
  • Be careful of any data you pass on

If you believe you have been scammed or want to more information about an organization, you can contact your State’s Attorney Generals office National website, www.naag.org, California website

www.ag.ca.gov/consumers/general.php, California Department of Real Estate – www.dre.ca.gov or the Federal Trade Commission www.ftc.gov

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