Doing the Mortgage Modification Two-Step by Bob Boog
If you are a homeowner who is dancing on thin ice, you may be looking at what others are doing to save their homes, and finding that many homeowners are modifying their mortgages. A mortgage or loan modification may not always result in thousands of dollars in principal being reduced, but it could mean a lower interest rate, an extension of the length of the loan (changing a 30 year loan to a 40 year term to reduce payments) or converting an adjustable rate loan to a low fixed rate loan.
The goal is to help a homeowner stay in his home, but homeowners should be wary. The current economic situation has also helped create unscrupulous loan mod specialists who prey on naïve homeowners. Some of these scammers will just take your money and never do a thing - allowing the house to foreclose. So here are six red flags to watch out for when doing the mortgage modification two-step:
•1. Specialist demands a large advance fee. A request for a large advance payment should alert you to the possibility of fraud, as some homeowners have learned the hard way after handing over their hard-earned money.
•2. Makes a 100% guarantee of success. Example: "We have saved thousands of homeowners, and we can help you too. Free consultation. Money-back guarantee! Note: there is no guarantee that any loan modification will be successful as it is up to the individual lender to modify one or more of the terms of your home loan.
•3. Too good to be true testimonials. "We reduced Terry Lee's principal balance from $350,000 to $85,000." Run, don't walk away from this one!
•4. Request that you grant a Power of Attorney to the specialist. A Power of Attorney allows the scammer to lawfully evict you from your home, and then collect the rent he charges to another tenant. Many times the person requesting the Power of Attorney represents a loan modification company that is attorney-backed, affiliated or attorney-based, but in reality the entity sending the letter has no such affiliation and is just skirting the law.
•5. Lease or rent-back scams, this is where the homeowner is told to transfer title via a Quitclaim or Grant deed to a third party, so that the homeowner can rent the property from the third-party, and buy the home back later. Transferring the title to a third party, however, is a dangerous thing to do because it gives a con artist the opportunity to evict you and then resell or rent the home.
•6. Just "sign prepared documents" without reviewing them. Be wary of specialists who don't allow you to take documents to your attorney or any trusted friend for review. Be especially concerned if a salesperson tells you that "they're just a bunch of boring forms".
Another red flag to watch for might simply be the high-pressure sales tactics of some salespeople who threaten that "you must act today" and/or instructions NOT to contact your lender, attorney, accountant or non-profit housing counselor.
The loan modification two-step is a popular real estate dance that many homeowners are doing. If you are not able to refinance your home because of the present market conditions, do your research and contact a non-profit housing center for referrals. Or you can just carefully follow the instructions from your lender, and you too may enjoy the benefits of lower monthly mortgage payments!
Bob Boog is a real estate broker and author of Mortgage Modifications Made Easy: a 50 page "do-it-yourself guide" $29.95 for homeowners who want more information, tips and tricks for successfully modifying a home loan. www.free-loan-mod-info.com
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