Loan Modification Scams - Beware Homeowners!

Maybe you are hard pressed to pay your home loan because of the terrible economy, sinking house prices, or personal financial disaster. Or possibly it is due to a combination of all three. Whatever the reason that you can no longer afford to pay your monthly mortgage premiums, you need a loan modification. You may feel desperate and ready to accept help from the first company you see, but beware of loan modification scams. They could end up costing you money and your house.

First off, it's important to understand that a modification is a legitimate thing. A lender can choose to work with borrowers to adjust their loan terms to make them more affordable. President Obama just enacted the Making Home Affordable plan, setting forth a $75 billion initiative to modify the loans of 4 to 5 million American homeowners.

After talking to a financial counselor, homeowners can begin the process. The financial counselor's purpose is to advise the homeowner and to act as their representative to the lender to help them get a decent loan modification. There are many HUD-approved counselors that are basically free of charge to use, and these are reputable companies.

There are also for-profit modification facilitators, who charge for their services. These for-profit companies have proliferated with the downward surge of the housing market in recent years. Some are legitimate, and some are scams. You must be very careful when using a for-profit company.

Here are some signs of a legitimate loan modification company:

1) Has a good reputation as determined by a Google search, the Better Business Bureau, the Federal Trade Commission, and the Consumer Protection Agency.

2) Offers a 100% money-back guarantee if it does not find an acceptable loan modification solution or alternative for you.

3) Will explain in detail everything they are doing, and explains the reason for each charge to you.

4) Has a physical office space (no online companies).

With a little research and a lot of caution, it is entirely possible to find a company that will help you out of your difficult financial situation. There are legitimate companies out there that charge for their services, but there are some loan modification scams out there so be careful. Stay away from any companies who don't offer money back guarantees, charge huge fees up front, or ones that just plain seem shady.

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