Loan Modification Gives Rises to Mortgage Fraud
?It should come as no surprise to the cynics out there that the rise in loan modification services has been plagued by scams and fraud. After all, there will always be “opportunists,” even those willing to take advantage of desperate homeowners on the brink of foreclosure.
Hope Now has become a popular target, since its position in this “industry” is one of such high profile. In its own words, “HOPE NOW is an alliance between HUD approved counseling agents, mortgage companies, investors and other mortgage market participants that provides free foreclosure prevention assistance.”
As part of a recently discovered scam, “Hope Now and…New Hope Modifications of Bellmawr, scammed consumers who believed the businesses were affiliated with HOPE NOW Alliance,” and “encouraged vulnerable homeowners to stop making mortgage payments so it could funnel the money into its coffers.”
Such fraudulent companies are able to traffic on the reputation of the “real” Hope Now, which is known for the speed and efficiency with which it can help homeowners delay or forestall foreclosure. “These firms often collect their fees up front, without ever contacting a mortgage servicer on the borrower’s behalf. Furthermore, they are not affiliated with any local, HUD-certified counseling organization.”
While it’s unfair to blame the government directly for mortgage fraud, it certainly deserves some responsibility. A laissez-faire approach to regulation has created a hotbed for con artists. For example, “A Miami Herald investigation last year…showed 10,000 people with criminal histories — including bank robbers and racketeers — had been allowed to sell mortgages in Florida since 2000,” and stole at least $100 million collectively from naive borrowers.
Shamed from inadequate regulation during the height of the housing boom, authorities are now determined to get the upper hand. The US Senate, for example, has already allocated an additional $500 million in funding for enhanced supervision and enforcement. Also, “the FBI has increased the number of agents who investigate mortgage fraud from 120 in 2007 to more than 250 today.” In Florida, where regulation was especially lax, “A special state fund will be created to pay victims if they successfully sue their mortgage broker but can’t collect because the broker becomes insolvent.”
So what can you do to avoid becoming such a victim? First and foremost, don’t hand over money until you are reasonably certain that the company you are working with is both qualified/legitimate, and not until the papers are signed and you have been approved for a loan modification. Any company that promises an unqualified loan modification is either lying or misleading, since every lender has standards/requirements that must first be met.
It usually just comes down to common sense. Do your homework before selecting a broker. One mortgage relief organization advises borrowers against paying a large amount of money upfront, signing over title, and/or putting money in an escrow account, under any circumstances. In the end, if it seems too good to be true, it probably is.