Beware of Loan Modification Scams

By: Timothy McFarlin | Published: April 5th, 2010 | Category: Loan Modification

A person going through a bankruptcy can make the perfect prey for loan modification scammers.  A loan modification scam takes advantage of a person in debt by charging a large fee for little to no work performed to modify a loan.  Persons operating a loan modification scam may make little to no effort to negotiate loan modification terms on behalf of their clients.  They may do nothing more than collect documents and money from the client without actually taking any action on the client’s behalf.  A person’s best bet would be to hire an attorney with knowledge of debt reorganization and loan workouts.  Attorneys are held to a much higher standard than loan modification companies, and are therefore often able to negotiate a loan modification when other would not be.  Additionally, an attorney with a background in both loan workouts and litigation can even file a mortgage litigation lawsuit against the lender for breach of their duty to modify loans.

If a person has already subscribed to a loan modification business for help with their debts and they suspect that the business is a scam, they should contact the Better Business Bureau (BBB) to see if any consumer complaints have been filed against the business in the past.  If the business has few to no derogatory comments, it may be safe to proceed.  A company with multiple complaints against it or no history at all, should probably be dropped as a service provider.

It is important for consumers to be weary of loan modification scams because they often entice borrowers with seemingly low service charges and monthly fees.  These low rates seem like a good deal to the subscriber at the time of program initiation, but very rarely are these programs beneficial in the long run.  If one takes into consideration the fact that these services perform little to no work to lower monthly payments through loan modification, any amount of money is too much.

While it is safe to say that loan modification scams are being operated every day, to say that every loan modification business is a scam would be an exaggeration.  It is true that there are plenty of loan modification services that are legitimate, but their track record will not generally be as good as law offices, especially those that also litigate loan modification turndowns.  

Before assigning the task of debt settlement or loan modification to a firm or agency, a person should take certain precautions to ensure that they are not dealing with a scam.  One thing a person can do is verify the address of their loan modification service provider.  It is best to deal with a local company so that the client knows where to go if they have a question or need guidance from the company.  One should visit the company in person if time permits to get a feel for their professionalism and demeanor.  Potential clients of these services should not be afraid to listen to their gut feelings and shouldn’t hesitate to walk away if it feels like a scam.  Some loan modification scam companies even pose as attorneys or organize with the word “law” in their name to fool consumers.  If payment is not being made to an actual attorney’s name, you may not be truly hiring an attorney, but rather a scammer.  Additionally, if meeting the actual attorney in charge of your case is not offered to you, this is a big red flag as well.

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