Obama Mortgage Loan Modification Scams

Put the words Obama and mortgage modification into the headline of your website, and you’ll get the attention of a lot of people. Who knows — you may even get some of their money, too. This tactic is used by a lot of mortgage modification scams lately. But after you finish reading this post, those scams will be easy to spot.

But first thing’s first. Let’s cover some basic terminology:

• Mortgage Modification — This is a process through which a homeowner’s mortgage is modified in some way to make the monthly payments more affordable. There are several ways to modify a loan in this way. The lender might lengthen the term, lower the interest rate, or (in rare cases) lower the principal amount owed.
• Obama — The 44th president of the United State. President Obama is often associated with the new mortgage modification programs (such as Making Home Affordable), because he led the charge for such programs.
• Scams — Any action designed to defraud people and make money through deceptive tactics.

How do these three things relate to one another? Well, there are lot of folks out there who have launched mortgage modification scams to defraud people, and they often throw President Obama’s name around to make themselves sound official.

Beware of Obama Mortgage Modification Scams

Here’s how it works. You are a homeowner struggling to make your mortgage payments, for whatever reason. You stumble across a website with an enticing headline / offer. It says something like this: “Need to lower your mortgage payments? We can help! We have special access to the Obama mortgage modification program, which you can use to reduce your monthly payments! It’s like your own personal bailout, courtesy of the U.S. government.”

The website is patriotic in appearance. It uses the classic red-white-and-blue color scheme of the American flag. There will probably be a picture of President Obama somewhere, as well. Americans helping Americans, right? Wrong. Let’s continue with out scenario…

So you sign up for the program and send in the up-front payment that’s required (a hallmark of modification scams, by the way). The company promises to work with your lender on your behalf, in order to lower your payments. After a month or so, you follow up with the company to see what they’ve accomplished. They inform you that, unfortunately, they were unable to secure a mortgage modification on your behalf.

Equally unfortunate is the fact that the up-front “processing fee” is nonrefundable. Guess what? You’ve just been had! You have fallen victim to one of the many Obama mortgage modification scams — which is a despicable yet rising trend.

Mortgage Rescue Programs? Not Likely

“Rescue” is another word that is frequently used by modification scam artists. Rescue, bailout, lifeline … whatever they call it on their websites and within their emails, it’s still a scam. No reputable company or counseling agency would offer to “rescue” you from your mortgage payments. It’s a practice used to prey on the desperation of struggling homeowners — nothing more.

I read a consumer advisory from the Treasury Department when preparing for this article, and they used the rescue word in the first sentence:

“Scams that promise to rescue you from foreclosure are popping up at an alarming rate nationwide.” -Full document (PDF file)

This advisory goes on to describe the same scenario I’ve outlined above. The scam artist will promise to work as an “intermediary” between you and your mortgage company, in order to secure a loan modification program and “rescue” you from a possible foreclosure.

Are you seeing a pattern with the language being used here? You should. These scammers are as unimaginative as they are unethical — they use the same language over and over, often copying it word-for-word from other modification scam websites. They all claim the ability to rescue you from foreclosure. Many of them claim to have special access to Obama mortgage modification programs. They often use “patriotic” color schemes and quasi-governmental names. (If the website address does not end with “.gov” … it’s not a government website.)

How to Avoid Loan Modification Scams

There is no reason to hire an “intermediary” to deal with your mortgage lender on your behalf. About 98% of the time, this suggests a scam in process. The only 2% is reserved for a handful of reputable companies and housing counselors who will help you coordinate with your lender. You can talk to your lender by yourself, to find out what mortgage modification options they offer.

Keep in mind that you may not qualify for a mortgage loan modification at all. Lenders are very selective when and to whom they offer these programs. They don’t give them out like candy. In fact, based on the emails we get, I would say that only a small minority of the people who pursue mortgage modifications end up securing one. Of course, the people who fail to secure a modification on their own are more likely to fall prey to one of the “rescue” scams. That’s exactly what the scammers are relying on — frustration and desperation.

Here are some other tips for avoiding the so-called Obama mortgage modification scams:

1. Deal with your lender directly. Ask to be connected with the “loss mitigation” department. Those are the folks who handle loan mods and other foreclosure-prevention programs.
2. Do not pay any up-front fees for anything. Ever. Period.
3. Do not use a company that offers to “rescue” you from your mortgage payments, or from a future foreclosure. Only scam artists use this word, and it’s one of their favorites.
4. Never send a payment to anyone other than your mortgage lender. Many scammers will tell homeowners to send payments directly to them, so they can pay what is required to the lender. This “intermediary” approach is pure nonsense.
5. Contact a HUD-approved housing counselor if you need help. Here’s the website where you can find one.

Common sense goes a long way too. If it sounds too good to be true, it probably is. Take a step back. Pause for reflection. Ask yourself if it feels right.

Help Us Spread the Word

Are you a blogger? Do you own a website? You can help us spread the word about these scams (and how to avoid them). I invite you to link to this page and recommend it to others, however you see fit. I’ve put a lot of time into this article, and I truly believe it will protect a lot of folks from scam artists — but only if they know about it.

If this page gets enough links from other bloggers and webmasters, it will rank high in Google for phrases like Obama mortgage modification. That way, people who search that phrase will find the truth, instead of finding a scammer’s website!

You can also share your story below, if you have firsthand experience with this sort of thing. I won’t be able to publish the company’s name, for legal reasons. But I’ll be happy to share your experience as a warning to others.