Tips to avoid loan modification scams

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The Federal Trade Commission has teamed with local and state authorities in a nationwide crackdown on loan adjustment scams, as reported in the Business section of The Times.

But one of the biggest challenges the FTC and its allies are up against is reaching homeowners looking to stave off foreclosure before the scammers reach them and dupe them, promising mortgage modification services that they never deliver.

The FTC produced a video on how to avoid scams as part of its inter-agency crackdown, dubbed ‘Operation Loan Lies,’ which can be watched and downloaded at www.ftc.gov/YourHome, or below.

The FTC’s video, ‘Real People, Real Stories,’ is also available in Spanish, which can also be seen below.

For those seeking to lower their monthly home loan payments, here are some tips on avoiding scams. The suggestions come from the FTC and the office of California Atty. Gen. Jerry Brown:

• The first thing anyone seeking to modify an existing loan should do is call his lender.

• Lenders want to hear from homeowners and will probably be more willing to work directly with them than with a foreclosure consultant. Do not ignore letters from your lender. Many lenders are willing to work with homeowners who are behind on their payments.

• Contact housing counselors approved by the U.S. Department of Housing and Urban Development, who may be able to help you for free. For a referral to a housing counselor near you, contact HUD at (800) 569-4287 or www.hud.gov.

• It is illegal for foreclosure consultants to demand money before they give you a written contract and before they actually perform all the services described in the contract, such as negotiating new monthly payments or a new mortgage loan.

• However, an advance fee may be charged by an attorney, or by a real estate broker who has submitted the advance fee agreement to the California Department of Real Estate for review.

• Do not transfer title or sell your house to a ‘foreclosure rescuer.’ Fraudulent foreclosure consultants often promise that if homeowners transfer title, they may stay in the home as renters and buy their home back later.

• Fraudulent foreclosure consultants claim that transfer is necessary so that someone with a better credit rating can obtain a new loan to prevent foreclosure. Beware -- this is a common scheme so-called rescuers use to evict homeowners and steal all or most of the home’s equity.

• Do not pay your mortgage payments to someone other than your lender or loan servicer, even if he or she promises to pass the payment on. Fraudulent foreclosure consultants often keep the money for themselves.

• Do not sign any documents without reading them first. Many homeowners think that they are signing documents for a new loan to pay off the mortgage they are behind on. Later, they discover that they actually transferred ownership to the ‘rescuer’ who is actually a scammer.

Homeowners who think they have been ripped off can file a complaint with the California Department of Real Estate through their website here. The department also offers tips on how to avoid getting scammed and what to do if you think you’ve been scammed here.

Complaints can also be made directly to the FTC by phone at (877) 382-4357, the FTC’s Headquarters or Financial Services Division in Washington, D.C., at (202) 326-2222. The FTC also has regional offices; in San Francisco at 901 Market St. and in Los Angeles at 10877 Wilshire Blvd.

HUD can set up homeowners with personalized guidance from housing counseling agencies they’ve certified at (888) 995-4673. More information on how to find free certified counseling services is available at HUD’s guidance website at www.hopenow.com or the Obama Administration’s website loan modification website, www.makinghomeaffordable.gov.

-- Nathan Olivarez-Giles