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    How To Spot A Mortgage Relief Scam

    Mortgage Relief application and key from home.

    The thought of losing your home to foreclosure is scary, but losing it to a mortgage scam is even more frightening. Companies prey on vulnerable homeowners by promising to provide lower monthly payments to those struggling to survive. They claim affiliation with the government and money-back guarantees. 

    Keep reading to establish their strategies so you can avoid falling prey to their schemes.

    Types Of Scams

    Fraudsters use numerous methods to locate struggling homeowners. For example, they may look through foreclosure notices or utilize ads to attract customers. They use catchy slogans such as “get a loan modification”.

     They use many of the following tactics to extract money from unsuspecting victims:

    • Fake Counseling: In exchange for a fee they’ll save your house or reduce monthly repayments by negotiating with your lender. They often claim to have the legal expertise and will instruct you not to contact your lender. Once they have your money, you won’t hear from them again. Some even insist that they receive your mortgage payments while they negotiate with lenders
    • Forensic Auditing: With a fee payment, you’re told your mortgage will be forensically audited to ascertain if your lender lawfully supplied the loan. They claim their report can be used to fight foreclosures, reduce your payments, or even cancel your loan. Sadly, there’s no truth to any of these claims
    • Rent-to-buy Schemes: Homeowners surrender the title to their property in exchange for remaining in the home and renting, with the option later to buy it back. The terms are usually so costly that repurchasing the home is close to impossible. Should the scammer default on mortgage payments, you’ll be evicted. They may even raise rents until you’re forced to leave
    • Equity-skimming: Scammers will offer to purchase a home as long as you’ll sign over the deed and move out. A cut of the profit is promised when the property is sold. What they actually do is rent out the house as the lender proceeds with foreclosure. You lose your home and are still liable for the mortgage
    • Bait-and-switch: Owners sign a loan to update the mortgage, but the small print sees that you’ll lose the title to your home when accepting a rescue loan

    What Your Rights Are

    You have rights as a homeowner under the terms of the MARS Rule, which sets out rules for those that sell mortgage assistance relief deals. It’s illegal for anyone to be charged for receiving assistance unless they accept it in writing. 

    You must also be provided with an agreement from the lender displaying alterations to the loan, should you accept terms. The company must spell out clearly the total fees for the arrangement should anything change on your mortgage.

    The MARS Rule demands that businesses share only clear and vital information in their advertisements. They must clarify that they aren’t government-affiliated, nor are they approved by them or your lender. Your lender isn’t permitted to alter your loan. 

    If a company advises ending your mortgage payments, then the risks involved should be clear. It’s illegal for the company to tell you to end communications with your lender. Failure to follow such rules strongly suggests a possible scam operation.

    Seeking The Help Of A Lawyer

    Having a lawyer’s assistance in obtaining a loan modification is a good idea. They can require an upfront fee, but only if they’re licensed practitioners in your state. They can also provide genuine services for your needs, meet state ethics guidelines, and place any fees in an account to be used only for services linked to your loan modification. You should be informed of any withdrawals.

    Many scammers falsely claim the involvement of lawyers, so do your research. Attorneys should never make outlandish claims or pressure you. Ensure your lawyer is accredited, licensed, and highly recommended. 

    Red Flags

    When looking for a loan modification, there are certain signs that should act as a warning for you. Avoid the following red flags at all costs:

    • An absolute guarantee to source you a loan or prevent foreclosure, irrespective of your circumstances
    • Advises you to cease communications with your lender, lawyer, or counselor
    • Claims an extremely high success rate in obtaining loans or mortgage relief for customers
    • Requests an upfront fee before proceeding (the exception being certain lawyers)
    • Only takes payment by check or wire transfer
    • Advises a house lease for you to then buyback, or advises you to transfer a property deed or title to them
    • Requests mortgage payments are made directly to them, rather than to your existing lender
    • Offers cash settlement for your house, at a significantly lower amount than market value
    • Applies pressure for agreements to be signed without allowing you time to read and comprehend terms and conditions

    Bottom Line

    If you struggle to pay your mortgage, don’t be taken advantage of by scammers. Contact your lender immediately, and try to arrange a better deal. Should you suspect fraud, report it to the Federal Trade Commission (FTC), your state Attorney General’s Office, or the Better Business Bureau.

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