How to Avoid a Mortgage Scam

Murphy’s rule states that “if something is too good to be true, it most definitely is.” Since the sub-prime mortgage crisis, the Fed has cracked down significantly on predatory lending and hopefully we can rest assured that the buzz words associated with this tumultuous time will be put to bed. Unfortunately, where there is a buck to be made, there are desperate con artists who think nothing of dashing the hopes of the unsuspecting. In response to the sub-prime mortgage meltdown, a whole new breed of criminal surfaced when desperate homeowners began to look into modification assistance from their mortgage companies.

Unsuspecting homeowners were being inundated with offers of modification assistance, attorney representations and offers that were in fact, too good to be true. Here are some red flags to look out for if you fear becoming the victim of a mortgage scam.

License: Creative Commons image source
License: Creative Commons image source

Know the Facts

During his first term of presidency, President Obama issued the “Making Homes Affordable Plan” in an effort to rescue the many Americans who were upside down in their mortgages and facing foreclosure. Mortgage companies were encouraged to work with delinquent customers and institute a modification of their current mortgage depending on a number of circumstances. Many “companies” saw this as an opportunity to prey on desperate homeowners by contacting them and making proposals that included a payment to secure their services to negotiate on your behalf with your mortgage company.

According to the State of Illinois Department of Financial and Professional Regulation, “you should not have to pay hundreds–or thousands–of dollars. Most HUD-approved housing counselors provide no-cost counseling services and many more provide low-cost counseling. Do not agree to work with a counselor who collects a fee before providing you with any services or who accepts payment only by cashier’s check or wire transfer.

In general, do not pay money to anyone unless you know exactly what services you will receive.” A well reputed counselor will help point you in the right direction but they cannot, however guarantee to stop the process of foreclosure. Only use counselors who are approved by the U.S. Department of Housing and Urban Development. You can find this list by calling 877-HUD-1515 or by visiting their website at

House of Wildflowers

Caveat: Buyer Beware!

Obviously, sharing information over the phone is a never a good practice of business. Be very wary of telemarketing operations that need things like social security numbers, mortgage account numbers, bank routing numbers and other revealing personal information. Ask them to put whatever they are pedaling on paper and send it via snail mail for your review. Don’t succumb to aggressive tactics such as expiring offers and other time sensitive promotions. If you smell a rat, check the Federal Trade Commission’s website at

As consumers, we can be so grateful for newly instituted government programs that come to the assistance of the distressed homeowner. However, desperate times make for desperate people. Falling prey to a scam could have disastrous results including identity theft, damage to your credit and even jeopardizing your chances at securing a real modification. Always be skeptical when anyone proposes a deal that sounds too good to be true- often times, it simply is not.

About the Author: Miguel Gross is a blogger for financial sites. If you want to make sure you are avoiding mortgage scams, consult with experts such as Turner Symons.

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