For homeowners who are struggling to maintain their current household bills due to a reduction in income, job loss, or an adjustable rate mortgage that is no longer affordable, finding a source of relief is crucial to help prevent foreclosure or other drastic events from happening. People tend to panic when they find out they can no longer afford to pay their mortgage, and this may cause some individuals to make a quick decision without thinking it through first.

Often times when in search for assistance paying your mortgage one of the first things you will find are loan modification or foreclosure prevention services. While they are some legitimate companies out there that provide this service, there are a ton of scam artists that prey on homeowners in distress. These companies do a great job advertising themselves as a legitimate company and may guarantee help in exchange for a fee. Be very wary when dealing with these firms and always do research before taking on their services. The FTC and state Attorney Generals have been doing an excellent job over the past couple years putting these unscrupulous firms to rest. Many of them have been charged huge penalties and some are even serving time in federal prison.

A loan modification involves changing the terms of the mortgage in order to reduce monthly payments and improve affordability. This may include an interest rate reduction, turning the loan into a fixed rate, or possible even extending the term of the loan to keep the monthly payments extra low. While they are some legitimate non profit and for profit companies, there are a ton of unscrupulous firms who do nothing but drain the borrowers pockets of their last available funds.

1. “Pay us $1,500, and we will prevent foreclosure.”

There are some legitimate housing counselors that may charge a small fee for their service, but those companies that charge thousands of dollars before any work is done is likely to be a scam. In fact, a lot of these firms are not allowed to charge a fee before their service is performed. Be very wary of anyone who promises to save your home in exchange for a lump sum of cash or a cashiers check upfront.

2. “100% guaranteed loan modifications.”

Any company that guarantees a loan modification or that they can stop foreclosure is a dead giveaway they are not a legitimate company. As we all know loan modifications are NEVER guaranteed and unrealistic promises such as this is a major sign that they are just trying to get your money. These companies no darn well that nothing is guaranteed when it comes to this process.

3. “No need to pay your mortgage payments.”

Never trust anyone that tells you to completely stop making your mortgage payments, as this is your decision to make. Even though it may be easier to achieve a modification while delinquent, everyones circumstances are different and this may not be in the best interest of the borrower.

4. “You can stay in your home, if you sign it over to us.”

 There are some companies out there that offer to pay your mortgage or rent your property back to you in exchange you transfer the title of your home. Please be very wary of these of these companies. If you transfer the title of your home to one of these companies they have the right to raise your monthly payments, sell the property, and possible even evict you from your own home. Even though once you transfer the deed you will no longer own your home, legally you are still obligated to pay the mortgage.

5. “Do not talk to your servicer if they call.”

If you are struggling to manage your mortgage payments the very first thing you should do is contact your servicer and attempt to work out a solution. It is in your best interest to contact your servicer regularly while going through this process to ensure your case is being worked on. Some of these crooked firms will say not to communicate with your lender because they know darn well your case will not be diligently worked on.

6. “Sign this asap!”

Always make sure to take your time to read and fully understand anything you are signing. Beware of anyone attempting to fill out paperwork for you unless you are there to go it. If someone is trying to pressure you into signing something you do not understand or do not agree with, do not do it!

7. “We are affiliated with government modification programs.”

Since the start of the Making Homes Affordable Program that came out last year, many of these companies sought a new tactic to attract distressed homeowners. Some will say they are affiliated or approved by the government and will often use names that sound similar to that of government programs. Also they may charge extremely high fees to borrowers who are not familiar with the program. Please be wary of these scams as there is no fee for the government modification programs and you can do this on your own. Just pick up the phone and contact your servicer to find out whether or not you qualify for assistance.

8. “Do you want to lose your home? Why haven’t you signed the agreement?”

Anyone who uses high-pressure tactics such as these is a sign of trouble. If the company you are working with is constantly pressuring you to sign something or not do something to prevent foreclosure, this is a sign they may be a scam. No one who conducts legitimate business will pressure you to sign anything.

For those of you out there who are struggling to pay your mortgage and are looking to hire a loan modification firm these are major warning signs to look out for. You do not want to waste thousands of dollars you do not have. For more information on foreclosure relief scams or if you would like to make a complaint about a certain company we advise you check out the Federal Trade Commission,, or the California State Attorney General.

Moe Bedard
My name is Maurice "Moe" Bedard. I am the founder of America's #1 Mortgage Forum, My online work has been featured in the New York Times, LA Times, Fox Business, and many other media publications.