This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

4 Ways To Prevent Mortgage-relief Scams





Millions of American homeowners are still underwater, attempting either a refinance or a loan modification to help make their mortgages more affordable and their homes more valuable.

But far too many homeowners don't properly investigate the supposed source for their mortgage relief and wind up scammed by fake mortgage-relief companies.

Mortgage-relief scams became a burgeoning trend in the aftermath of the Great Recession as massive home price declines wiped out home equity leaving millions of homeowners underwater -- owing more on their mortgages than their properties are worth.

With so many homeowners facing financial distress, mortgage-relief scammers have stepped up their efforts to try and separate vulnerable homeowners from their money.

Definition

According to the U.S. Federal Trade Commission, "Mortgage relief scammers falsely claim that, for a fee (typically hundreds or thousands of dollars paid up-front), they will negotiate with consumers' mortgage lenders or servicers to obtain a loan modification or other relief to avoid delinquency or foreclosure. Many of them pretend to be affiliated with the government or government housing assistance programs. Some falsely claim to be offering legal services or 'audits' of consumers' loan paperwork to help them negotiate a resolution with their lenders. Unfortunately, these operations often fail to obtain the relief they promise, and they sometimes fail to take even minimal steps to help consumers."

Jeremy Heck, a consumer law attorney in Columbus, Ohio says there are two major types of mortgage-relief scammers that advertise heavily via the Internet and mail.

"There are mortgage brokers that attempt to refinance a consumer's residential real estate for what amounts to extraordinarily high fees," he explains. "There are other companies that advertise to modify a consumer's mortgage and claim they can achieve a much lower interest rate. Both of these types of companies advertise in a way that implies they are related to or are part of a governmental organization."

Here are four tips to help prevent mortgage-relief scams:

Do not pay any money up front

Heck notes that some loan-modification companies charge high fees of between $2,500 and $5,000. "But at the end of the day, they provide absolutely no benefit," he says. If you are talking to a mortgage-relief company that promises they can reduce your home loan, ask for testimonials and references from satisfied clients -- and never put any money down until you see some results.

Don't assume you are safe from foreclosure

If you've been receiving mortgage delinquency notices from your mortgage lender, you may be closer to foreclosure than you might think. At that point, it's much better to work directly with your bank or lender than a mortgage-relief company. "Many times a consumer will believe they are protected from foreclosure having retained a loan modification company, but in reality, there is no protection and a foreclosure is usually imminent," says Heck.

Ask a lot of questions

If you do decide to hire a mortgage-relief company, start asking questions, and don't agree to anything until you get those questions answered.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,156.85 +24.88 0.15%
S&P 500 2,001.55 +2.57 0.13%
NASDAQ 4,562.1890 +9.43 0.21%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs