Spotting Fake Loan Fixers

One defining characteristic of fraud and scam artists is that they know just when a desperate situation becomes ripe for exploitation. Take the current state of the housing industry. A fair amount of defaults and foreclosures in the previous year has done some considerable damage to it and struggling homeowners are now as worried as ever about losing their homes. From out of nowhere come a horde of loan modification companies, offering instant relief – as advertised in their unsolicited emails, snail mail, and sometimes, even SMS.

While there are definitely a few legitimate debt reduction centers out there, a huge chunk consists of debt reduction law center fraud – firms that offer their services for quite a hefty amount. A handful of government-sponsored organizations provide the same services for free but the recession has created an incredible amount of backlog for them. It doesn’t help that banks often have a set time frame – waiting too long to act on the problem can potentially hurt your credit score.

This desperate situation can be daunting for most homeowners but risks taken with legitimate debt reduction firms are relatively low compared to loan fixers who are not entirely familiar with creditor guidelines and modification procedures. Most lenders only allow debtors one chance at negotiating a workable deal and entrusting your loan specifics with inexperienced modification companies will likely get you the one option you’ve been dreading to hear: pay up or lose your property.

So before you make any deals or negotiations with companies offering loan modification services, make sure to keep in mind the following points:

1) Legitimate modification firms will not ask you for payment for information. Not only is this deemed unethical, it is also illegal in several states. What do you do when you get a flier under your front door offering information and help right after you “pay a small sum”? Tear the flier into pieces and bin it.

2) Modification scams will guarantee you better terms or a lower interest rate on your loan. Flee at the first mention of the above. No firm knows for sure what kind of loan modification can be done on your account, especially before they have seen your documents.

3) Firms that have names too similar to government-sponsored housing counselors should immediately set off warning flags for a debt reduction law center fraud. Your best bet? Call your local housing counselor and ask about the company in question.

If in doubt, ask questions. How a company delivers information and addresses concerns will say a lot about how they handle business.