Our good friends at the Consumer Financial Protection Bureau (CFPB) say these “low-life” mortgage rescue scammers have taken $25 million in illegal advance fees from consumers.
Federal law bans law firms—except under very limited circumstances—from requesting or receiving payment from you for help obtaining foreclosure relief, such as a mortgage modification, before you’ve signed a mortgage modification agreement with your lender.
In one case, the CFPB alleged two companies and their principals offering legal services took in over $19.2 million in fees from over 10,000 distressed homeowners nationwide, with most, if not all, of that money coming from illegal advance fees for so-called loan modification services.
There are red flags that a company claiming to offer legal foreclosure relief help may not be worth your money. Watch for the following warning signs and ask more questions:
1. Demands for payment upfront. If a lawyer or someone claiming to offer legal help wants to be paid first—before you receive a modification—they may be breaking the law. A licensed lawyer can ask you to pay first but only if the lawyer is licensed in the state where you live or where your house is located. Even a licensed lawyer in your state can only receive up-front payments if they meet other requirements about what they charge for, how they deposit the money, and if they comply with all other state laws and regulations.
2. Any claim that a modification is guaranteed.Your mortgage company must agree before you can get a modification. A lawyer or someone claiming to offer legal help cannot guarantee you will get a loan modification.
3. A hard sell. Most licensed lawyers do not call or e-mail you directly and push you hard to pay money right away. If someone claiming to be a lawyer calls you on the phone and asks you to sign papers or pay them right away, ask some more questions to be sure it’s not a scam. Here’s a guide to help you determine if it’s real legal help or a foreclosure scam.
When it comes to actually getting help with foreclosure relief, your mortgage company may require you to authorize a third party to act on your behalf, so it’s important to know what this means for you. Only authorize a third party that is trustworthy and be careful about exactly what you’re authorizing them to do.
BEST ADVICE: Be careful dealing with companies that you are not comfortable or find unfamiliar. There are a lot of sharks swimming around as mortgage rescue scammers.