The media has been rife with horror stories of scam artists preying on one of the most vulnerable sectors of our population, troubled homeowners and their families. However, many homeowners just haven’t got the message so we shall revise a few of the signs that can help us spot a loan modification scammer.
These leeches of society will ask for exorbitant fees from homeowners too worried or clueless to see they are paying a thief for something they could do for free.
It must be said beforehand that, as in so many other industries, the many pay for the sins of the few, and that most loan modification agents are just trying to make a decent living providing a service.
Scam Alert 1. Charging Upfront Fees.
It is illegal in many states to charge upfront fees, or fees for services that have not been provided yet. Even for states where it is not illegal it is certainly a clear sign you are dealing with a potential scammer. Stay well away from any company that tries to charge you with upfront fees.
Scam Alert 2. They Guarantee They Can Stop Your Mortgage From Foreclosing.
This is another red flag for loan modification companies you don’t want to touch with a seven foot pole. Nobody can guarantee a servicer will provide a loan modification and stop a mortgage from foreclosing. Not even the Government has been successful at forcing servicers do that, it is unlikely your loan modification company downtown is going to be able to.
The truth is that there are free loan modification counseling agencies that will provide you with all the information you need. We are used to paying for a good service and feel that the free option must be in some way of inferior quality than HAMP counselors. These counselors are not volunteers working out of charity; they are paid by the Government, just not by you.
Scam Alert 3. They Ask You To Stop Paying Your Lender And Start Paying Them.
It is amazing that anybody would fall for this, but we do. The companies will claim that you need to be behind in your payments in order to qualify for a certain loan modification or that they will take care of the payments or any other kind of bogus explanation. Don’t believe it. You do not need to be behind in your payments to get a loan modification you just need to have proof that you can’t afford the current payments. Work on your hardship affidavit, but whatever you do don’t stop making payments. It will only make things worse by further dropping your credit rating.
What Should You Do?
Your best option is to call your state’s HOPE hotline at 877-462-7555 and ask for your closest nonprofit housing counselor or check it out yourself here.
Loan Modification Companies will tell you that you need their help to fill in forms and that nonprofit counselors don’t have your interests in mind like they do. It can be faster and easier to use a loan modification company if you can afford it. Just be careful you don’t become another mortgage modification scam statistic.
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Debt is truly a four letter word for many of us. When we fall in the grips of uncontrolled debt it can suck the life and joy out of whole families and even communities. The problem is that it is so easy to fall into debt. Everyone wants to lend us money and there are so many great things to buy with it.
When all we hear on the TV and radio is about loan modifications, mortgage refinances debt relief. It pays to understand these and other terms and be able to make an educated decision.
A recent report on the Nicaraguan economy, the poorest Central American country after Haiti, showed that only 1% of the population really had the resources to afford having a credit card. It goes without saying that the actual percentage of the population that own a credit card is much higher, well into the 50%. The economist behind the report advised his Nicaraguan readers that could not afford to have a credit card to burn it. It will only bring you difficulties. This somewhat simplistic approach to debt relief, getting rid of your credit card, does have its strong points, in fact it might even make our top 3 debt relief measures.
So what debt relief steps can we make to improve debt management?
The first step is to analyze your situation. You need to spend some time and effort working out exactly where you are financially. How much money you owe, to whom, how many expenses (including debts) do you have every month and what your monthly income is. You then need to work out how much you can afford to pay toward expenses every month. In your analysis you need to include interest rates, debt tenures (when the loan ends) and prepayment fees.
One you have all this information you can compare your current interest rate with what the going market rate is. If your pre-payment fees are not too high you could look into modifying your loan or mortgage.
Loan Modification is a very popular debt relief measure at the moment. Such is that case that the government has earmarked 75 billion (yep, that is a “b”) dollars towards helping desperate homeowners to get a loan modification.
Loan modifications can help homeowners to reduce their monthly interest payment, which can reduce their monthly mortgage payments. Loan modifications can also save you money on your principal (the cash you actually borrowed, taking away interest) if you take advantage of the bonuses the government programs provide on borrowers that pay on time. However loan modifications are far from a panacea, there are a lot of things you can get wrong so it is worth consulting with a government agency for unbiased information.
Debt Consolidation or the purchase of a super loan that pays off smaller loans with higher interests is also a popular choice. One must also be careful with this type of debt relief because it can be very expensive. Debt consolidation interest rates although lower than that of credit cards and car loans are still higher than the interest rates of mortgages and similar large loans. They also have the disadvantage of securing your loan with your home. You will not lose your home if you fail to pay your credit cards but if you secure a debt consolidation loan with your home to pay your credit card debts, you could.
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