What about too good to be true loan modifications?

Beware of scams as you search for foreclosure prevention assistance.

If it sounds too good to be true then it probably is. People who have faced foreclosure and other financial crises are especially vulnerable. They become more receptive to fraudulent offers of assistance. Con artists realize this and go to extremes to ensure their scams appear authentic. Criminals will use bogus web sites, phone calls, advertisements, correspondence and other methods to contact potential victims.

Mortgage loan scams are devastating. According to The Federal Trade Commission , the most common mortgage loan scams are:

  • Phony counseling or phantom help – Scammers promise to intervene with lenders on the homeowner’s behalf for a price.
  • Forensic audit - Scammers promise to examine your mortgage documents for any legal infractions for a price. Supposedly the homeowner can use these infractions to obtain or speed up a loan modification.
  • Rent to buy – The homeowner gives the title of their property to the scammer who promises to:
    • sell the house and share the profit
    • rent the house and share the profit

The criminal keeps the title, does not share any profit and the homeowner loses the property.

  • Bait and switch – The homeowner signs paperwork to obtain a ‘rescue’ loan but in reality are signing over the title to their home.

 Loan Modification Alert suggests there are useful options to safeguard against this fraudulent activity:

  • Don’t make any advance payments to companies that promise to ‘fix’ the mortgage issue. If a loan modification, refinance, reinstatement, or other foreclosure prevention interventions are needed, contact a trusted source.
    • Mortgage payments should be paid directly to your lender, unless the lender authorizes an alternate source.
  • Don’t sign any paperwork with which you disagree or don’t understand, consult with a legal professional first. You may be unknowingly signing over the title to your home.
  • Don’t divulge any personal information to any unknown parties over the phone or online. Certified Housing Counselors can be found on the U. S. Department of Housing and Urban Development (HUD ) and Michigan State Housing Development Authority (MSHDA) websites.

Michigan State University Extension has released a new toolkit for homeowners who are experiencing or have previously experienced foreclosure. This toolkit will equip these individuals and families with tools to help them recover their financial stability, in the case that a recovery of their home is not possible. The toolkit is available to download free at MIMoneyHealth.org.

Michigan State University Extension offers financial literacy and homeownership workshops throughout the year to help you become financially healthy. For more information of classes in your area, go to either MSU Extension events page or the MI Money Health website. Additionally, you can take the Financial Health Survey at MI Money Health to access if you’re financially healthy and discover more ways you can improve your financial health. 

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