You Can Bank On Our Rates

The most local, national and online bank rates!

Feds Warn About Home Loan Scams

By Brian O'Connell
The term “loan modification”
has become a high-profile addition to the cultural lexicon – right up there with “Crackberry” or “Tweeting”.

But Uncle Sam wants you to know that it’s most recent definition of loan modification includes a line or two about scam artists who use such loans to con consumers out of thousands of dollars.

That was the gist of a special press conference last week in Washington, D.C., where U.S. Treasury Secretary Tim Geithner, Federal Trade Commission (FTC) Chairman Jon Leibowitz  and U.S. Attorney General Eric Holder put the spotlight, and the full weight of the U.S. government, on loan modification con artists.

“Scammers are taking advantage of people in a difficult situation – people who are trying to modify their home mortgages or those who are trying to avoid foreclosure,” said Leibowitz.  “We’re enforcing the law against these scam artists; we’re putting others on notice that unless they change their ways, they’re next; and we’re working with other government agencies, non-profits, and mortgage companies to reach out to our neighbors in distress with the details of how to get help.”

Loan modifications are growing in popularity as many U.S. homeowners struggle to keep up with their mortgage payments. Typically, consumers who are late on their mortgage payments or closing in on foreclosure are vulnerable to loan modification fraud. According to the FTC, scam artists often ask for and receive anywhere from $1,000 to $3,000 for loan modification services that will likely never be provided, like negotiating with a mortgage lender. Many loan modification scammers will imply that they are linked to loan modification programs run by the U.S. government.

So what’s the U.S. government going to do to send loan scammers packing? For starters, the FTC has issued warning letters to 71 companies suspected of misrepresenting themselves to home loan mortgage customers. The FTC is also launching a massive consumer education program to warn consumers about loan modification scams.

The government has warned consumers to especially watch out for loan modification firms who:

  • Use terms like “guarantee” or “100% success rate” in their marketing campaigns.
  • Demand up-front money before they provide any service to a loan modification customer. The FTC warns that loan modification programs linked to the U.S. government never ask for cash up front and companies that do are a big red flag.
  • Ask that you not contact your lender for updates on your loan modification process.
  • Ask that you make mortgage payments straight to their company and not to your mortgage lender.


The U.S. Housing and Urban Development office has a database of government-approved loan modification counselors at http://www.makinghomeaffordable.gov, or by calling 888-995-4673.

Altogether, the Obama administration estimates that anywhere from seven to nine million U.S. consumers might be in the market for a loan modification program. If you’re one of these customers, keep a sharp eye out for loan modification sharks.

—For more ways to save, spend, invest and borrow, visit MainStreet.com.

Savings Center
Sponsored by

green arrow NEW: Insurance Center

green arrowFinancial Resources

CalculatorCalculators: Access to our Savings, Mortgage, Auto Loan and Personal Finance Tools.