Homeowners: Beware these loan modification scams

09/03/2011 12:00 AM

09/03/2011 12:07 AM

The Better Business Bureau wants to alert consumers about loan modification scams and how too-good-to-be-true deals are more common in today's fragile economy.

Scammers offer to provide loan modifications to save homes from foreclosure, and then demand a large fee in advance — often thousands of dollars. Others pretend to offer government grants and charge big fees for items that are useless or can be found on the Internet for free. Scammers usually take all the fee money, provide no services and then disappear.

Legitimate businesses may offer to help with loan modifications, but some charge high fees that are costly for the consumer and may not help avoid foreclosure.

Watch out for the following loan modification scams:

* Loan flipping _ Loan flipping involves repeated refinancing, where prior loans are rolled into new loans on poor terms, often with large fees piled on top. It often leads to foreclosure.

* Property flipping scams _ Scammers try to convince home buyers that they can help them with the details of a home purchase. As a result, there isn't anybody protecting the home buyer's interests. Be sure you choose a reputable, independent attorney and home inspector who will represent your interests fairly.

* Equity skimming or equity stripping _ In this type of foreclosure rescue scam, the scammer asks the homeowner to convey the deed to the property on a "temporary" basis, and then refinances the property and "skims" or "strips" away whatever equity is in the home. The scammer then disappears, leaving the homeowner with the possibility of a second foreclosure suit.

* Mortgage elimination scams _ Some have scammed people out of their properties and large sums of money by pretending to manipulate the bank lending system. The scammers may create fraudulent documents for consumers that supposedly release them from their mortgage obligations. Second loans are then taken on the properties in order to pay the fraud perpetrators.

Mortgages cannot be "eliminated" through phony claims that a loan is "invalid." Common sense tells us that you cannot eliminate a legal debt simply by pretending it is not real. Even so, many fall for "mortgage elimination" schemes that feature this kind of claim.

Consumers who are considering loan modifications should understand all of the options available to them, including eligibility for real forms of government help and whether they can afford the modified new loan. Borrowers may be signing away certain rights by agreeing to a new loan modification, so it's important to get advice from a qualified professional before signing. Consumers may contact reputable housing counselors through the U.S. Department of Housing and Urban Development at 800-569-4287 or www.hud.gov.

Consumers need to remember that anyone offering home lending, mortgage refinancing or debt relief needs to be licensed with the Office of the State Bank Commissioner. The bank commissioner's office may be reached at 877-387-8523 or www.osbckansas.org.

Consumers also may contact the Kansas Attorney General's Office at 800-432-2310 to ask about a lender's record.

The BBB suggests consumers check out potential lenders or financial services providers before they do business with them by contacting us at 800-856-2417 or online at www.kansasplains.bbb.org.

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