You might receive an official looking letter, see an ad on television or hear it on the radio, or stumble upon a website—someone offering to help you modify your mortgage, for a small fee, with guaranteed results!
Are these offers fake or real?
Well, these days, it’s harder and harder to tell. Anyone can claim to be a “certified” housing counselor, and may use the seal of the US Department of Housing and Urban Development (HUD), which sponsors housing counseling agencies throughout the country, on their business card and website. Don’t be fooled. “Know who you are dealing with, check the legitimacy of their credentials,” cautions Yolanda D. McGill, senior counsel with the Lawyers’ Committee for Civil Rights Under Law, a national non-profit that’s compiling a database of mortgage modification scams.
From the approximately 26,000 complaints they’ve collected since 2010, representing $62 million in losses, McGill notes a few trends:
- The average homeowner loses $2,982 to the scam
- Activity hotbeds are Southern California and Florida
- Scammers target vulnerable populations—elderly homeowners and homeowners with limited English
Scammers frequent foreclosure events to find victims and may use a legitimate business front, even legal offices, as happened last month in San Diego where an alleged $11 million loan modification fraud scheme  was operating within a law firm. According to the federal indictment, telemarketers contacted homeowners nationwide pushing modification offers. They claimed to have helped thousands, with a 98% success rate. They said client fees (thousands of dollars each) would stay in a trust account until the client was satisfied—there was even a money-back guarantee! In the end, clients lost the fees, and were further behind on their mortgage payments. No loans were modified; and many homes went to foreclosure.
This is not an isolated incident. As part of the Lawyers’ Committee’s work with the Loan Modification Scam Prevention Network (LMSPN), action has been taken against organizations like this in California, Florida, Georgia and New York.
The best way to avoid scammers is to never pay for help with your mortgage and to work with people you know. Here’s a list of where to turn for help.
- Your current mortgage company (the company listed on your monthly mortgage statement). The company currently servicing your loan is always the best place to start.
- The investor of your mortgage. Many mortgages may be backed by another company/investor, such as Fannie Mae or Freddie Mac. Use the loan lookup tool  on this website to see if Fannie Mae owns your loan, which makes you eligible to get assistance from a Fannie Mae Mortgage Help Center . Use this link  to see if Freddie Mac owns your loan.
- Your local bank (or credit union). These organizations will be backed by the Federal Deposit Insurance Corporation and are listed in FDIC’s directory .
- A HUD-certified counselor. Contact the Homeowner's HOPE™ Hotline at 888-995-HOPE or find a HUD-certified housing counselor using HUD’s website . HUD-certified counselors are not permitted to charge consumers for foreclosure prevention counseling services. However, they can charge “reasonable and customary” fees for other forms of housing counseling and education services.
The Best Help is Free
That distinction opens the door for criminals who point out that free services can’t be as good as services you pay for. Says McGill: “It’s counterintuitive, but in this business the best help is free, whether it’s from a HUD-certified counselor, a mortgage company, or mortgage investor. Homeowners should never pay hundreds, or thousands, of dollars for help with their mortgage.”
Editor’s Note: If you think you’ve been scammed, report it! Help ensure other homeowners do not fall victim, call 1-888-995-HOPE or submit an online complaint .