California Releases New Loan Modification Fraud Warning

July 08, 2011

California Releases New Loan Modification Fraud Warning

The current state of the housing market has provided a situation ripe for the exploitation of anxious homeowners. The dramatic rise in home loan modification scams -- California's Department of Real Estate (DRE) reported over 4,500 cases of loan fraud have occurred in the state alone -- has made the education of consumers an important step in fighting this criminal activity.

To that end, California issued a new warning to consumers this year highlighting the most common type of home loan modification fraud. Predatory companies target struggling homeowners through foreclosure notices, Internet banners or flyer advertisements, often claiming unrealistic success rates and guarantees to save your home. They then charge an advanced fee in order to negotiate with the homeowner's lender, or tell the consumer to pay the mortgage to them instead of to the bank because they will take care of the negotiating.

Instead, these loan modification companies take your money and do little to no work with the bank. They do not have insider secrets, as they often claim. Many of the businesses move frequently to avoid detection and change phone numbers regularly.

In 2009, California enacted laws to protect consumers, such as a ban of up-front fees for loan modification services. In addition, the DRE has issued 244 orders to dishonest companies to cease and desist their actions.

While these fraudulent companies are hurting homeowners, there are legitimate options for homeowners behind on payments. Chapter 13 bankruptcy is a plan to reorganize debt into manageable payments. A lender must stop foreclosure proceedings immediately when the bankruptcy filer seeks Chapter 13 protection. After the reorganization of debt, the homeowner will pay back the lender what he or she owes over a period of time.

A Bankruptcy Attorney Can Help

Despite the frauds perpetrated by these companies, there is legitimate help to save your home. An attorney can discuss your options, such as legitimate help with loan modifications, if appropriate, or other options such as a short sale or deed in lieu of foreclosure. If you are behind on your mortgage payments, do not panic and fall for loan modification scams. Contact a bankruptcy attorney in your area.

Article provided by The Law Offices of Gerald Wolfe
Visit us at http://www.gwesq.com