Signs of Loan Modification Company Fraud

By admin ~ October 24th, 2009. Filed under: Realtor License.

The loan modification industry in California has truly become pathetic. More often than not, a company is either not operating legally or not providing a legitimate service. There are competent companies out there, but they are, unfortunately, few and far between. If you already know you have been scammed by a company, skip down to the bottom to find out how to get your money back. These signs are California specific, but many states do have comparable guidelines.

The following is a list of items which should not be tolerated in dealing with loan modifications.

A loan modification company operating in California must be licensed by the California Department of Real Estate. Request for a license number of the broker and/or licensed corporation number.
If the loan modification company is collecting an advance fee, they must be authorized to use the agreement by the California Department of Real Estate.
Every loan modification company should have some kind of pre-qualification or consultation process. Not all loans make sense to modify. If they are not interested in determining if you are a likely candidate of a loan modification, they are likely not really interested whether or not you will be pleased with their services. Legitimate companies want happy clients. They can only be created by communicating the proper expectations.
Do not hire “attorney-backed” or “attorney-assisted” companies. If you want legal services, hire an attorney directly. There are a number of laws which prohibit and restrict the relationships with attorneys and non-attorneys. If you paid money to a company like this, you may be dealing with a company operating illegally.

The following is a list of items which, by itself, are not determinative of the company’s practices, but they are a red flag or sign which should at least raise concern.

Be careful with a 100% guarantee. Guarantees are usually not full proof and always have loopholes. Review your contract agreement in detail.
Be Careful with companies that are doing a lot of loan modifications per month. Loan modifications are very tedious and most companies only concentrate on the sales. Once a client is signed up, they are often lost in the shuffle.
Be careful with companies that are not operating locally and are not available to meet with you in person. It is common for many people to debit thousands of dollars to a person or a company they never met. It is easy to do when they promise results which cannot be refused.
Be careful with high advance fees. Anything more than $6,000 for a loan modification should be passed on. Anything more than $4,000 needs to be justified by a high quality of service and perfect record.
Be careful in signing an agreement with a company or person who is completely different than the person you are working with.
Be careful if there are multiple parties dealing with your file. This may be a sign that you are working with a call center or marketing company with another company that does the processing. This is an indication that the company is doing high volume in the number of loan modifications. As discussed above, high volume equals lower quality when it comes to loan modifications.
Be very careful if they promise principal reductions or rescission of your loan.
Be very careful if they are a new company. Most loan modification companies are new, but companies that were not operating properly before have died and been resurrected in recent months. Look for a company that has been doing business since at least last September 2008. If they have been around for this long, it allows you to determine if they have any complaints to the BBB.
Many may disagree, but loan modification companies which provide loan audits may only be providing an unneeded service at additional cost to the borrower. Many times these loan audits truly do not add much to the modification process.

Need help confirming your suspicions about the company you are dealing with?