The Associated Press

Thursday, Sept. 17, 2009 | 9:30 a.m.

The head of the Federal Trade Commission said Thursday the agency is considering banning upfront payments to companies that advertise help for borrowers who are in trouble on their home loans.

Government officials say scammers seeking to take advantage of borrowers in danger of default often charge upfront fees of $1,000 to $3,000 for help with loan modifications that rarely, if ever, pay off.

“If you are concerned about keeping your home, avoid any company that asks you for a large fee in advance. That is a real red flag,” said Jon Leibowitz, chairman of the FTC. Such upfront fees are already prohibited in 20 states.

His comments came as his agency announced it filed civil charges against two companies, San Diego-based Nations Housing Modification Center and Infinity Group Services of Orange County, Calif.

The government accused both companies of charging homeowners large fees for assistance in working with their lenders, but doing “little or nothing” to actually help borrowers.

Leibowitz said the FTC was also considering restrictions on how mortgage rescue companies can advertise their services. Ads for loan modification companies frequently appear on late-night TV and on billboards in some parts of the country. Nations Housing, for example, mailed homeowners official-looking letters purporting to be from an address on Pennsylvania Avenue in the nation’s capital.

They were designed to trick consumers into thinking that they were participating in a government program, regulators said.

The government has filed charges against 22 companies operating such schemes and say the firms often have names or ads designed to make borrowers think they are using the Obama administration’s efforts to help modify or refinance millions of mortgages.

On Thursday, 12 state attorneys general met with U.S. Attorney General Eric Holder, Treasury Secretary Timothy Geithner and Housing and Urban Development Secretary Shaun Donovan to discuss their anti-fraud operations.

“A lot of these scams operate nationwide, from outside our borders,” said Connecticut Attorney General Richard Blumenthal.

There is an obvious need for third party representation to help homeowners who are facing foreclosure proceedings from banks that fail to work out a swift and unbiased loan modification solution.

However, it can be easy to fall victim to predatory loan modification opportunists unless you know what to be aware of.

Researching for a negotiation team that you can trust is important, but be aware of the marketing tactics that are putting home owners in worse shape than they are already in.

Loan Modification Red Flags to pay attention to:

1. Spam lead generation blogs and web sites -

These are web sites littered in Google sponsor links or banner advertisements mixed in with a few stolen articles that they scrape from other places online.

Look for a company address, phone number, and “About” page that clearly indicates who the site owner is.

Be sure to preview any disclaimers prior to filling out a Loan Modification Application to make sure they don’t mention anything about “Referring” your information to an affiliate for completion, which would suggest that they are probably just going to sell your information over and over again.

2. Promises to “Shave off” hundreds of dollars from monthly payments -

Since each loan modification scenario is unique, it is impossible to make any promises before your complete file has been reviewed by an experienced loan modification negotiator.

3. Signing over Deed -

Do not sign over anything to a company who wants to modify your loan or pretend to be your new bank.

This scam has been going on long before the modification craze where an investor promises to pay off your lender and let you make payments to them until you can qualify to refinance the home back in your name.

What generally happens in this type of scenario is that the homeowner loses ownership rights to the house, yet is still left on the hook for the loan. The investors then collect the recent homeowner’s monthly rent until the property ends up in foreclosure.

4. No contract prior to collecting fees -

It is required by law to provide a homeowner a written contract that clearly defines the terms of service, payment, and rescission period prior to collecting any advanced fees for a loan modification.

US Home Loan Advocates is a No Up-Front Fee Loan Modification Firm, which means we only charge for services once they have been completed.  Basically, get the terms of you business relationship in writing before you give anyone money.

5. Virtual Company -

There are many web sites promoting affiliate business opportunities for people who want to market loan modification programs in exchange for referral fees. Make sure you verify that the loan modification company has an actual place of business with an office. A simple online storefront does not suggest that the company is invested in a long-term business model.

Related Articles

• What Is A Loan Modification?
  
• Do I Qualify For The Obama Making Home Affordable Modification?
• How Much Will My Payment Decrease With A Loan Modification?
• Will A Loan Modification Affect My Credit?
• Getting Approved For A Loan Modification – It’s All In The Packaging
• Required Documents For A Loan Modification
• Writing A Loan Modification Hardship Letter

I’ve written a few articles about mortgage modification scams and foreclosure fraud on this blog, but I just found this video produced by Freddie Mac that specifically talks about the scam that involves signing over a deed.

Basically, don’t sign over your deed or deal with an “Investor” that wants to rent your house back to you while they work on your credit or loan modification.

Even though this is a common loan modification / foreclosure scam that has been well publicized in the media, our office is still hearing from people who have been forced out of a home that they thought they owned.

One of the more common and tragic foreclosure scams is where homeowners sign over their deed to avoid foreclosure with the promise of purchasing the property back at a later date for a lesser value and lower payment.

The recent Home Affordable Modification Program allows a struggling homeowner a short-term mercy period where they can work with their current lender either directly, or through an attorney backed loan modification negotiation firm for the purpose of finding a workable solution for future lowered payments.

There is no reason to sign over a deed, tie your property up in a Trust, or become a renter in your own home.

We have all heard some of these horrible stories that may have happened to a friend or family member. When we are in pain, life is chaotic, and the fate of losing a home becomes a reality, sometimes it seems less embarrassing to work with a stranger vs reaching out to the people we trust.

“I thought that I could fix the problem within a year while keeping everyone I know out of my business.”

This is a common response that we hear from people who have been taken advantage of by a loan modification company who ended up stealing their home.

Please, do your research or lean on your friends and family for a reputable loan negotiation firm, but don’t sign over your deed with the hopes of buying / refinancing your property back at a later date. It won’t happen.