Government promises to help prevent refinance and loan modification scams

President Obama pledged on Monday that the government would begin working to help home owners who are being taken advantage of in mortgage refinance and home loan modification scams. The mortgage industry has  seen a large increase in the volume of refinance loans thanks in part to the federal reserve purchasing mortgage bonds and bringing interest rates down to historically low levels.  The drop with rates has been a major boost in helping strugling home owners refinace their mortgages out of adjustable rates into low fixed interest rates.  The challenge for the government is to help home owners who owe more than the value of their homes, may have bruised credit or are currently behind on their mortgage payment. This segment of the housing industry has been susceptible to the majority of fraud that has occurred over the past twelve months.

Home owners who have fallen behind on their house payments and are struggling to pay their mortgages are often the individuals who are most likely to be the victim of a scam as they are desperate for help and often find working with their mortgage lender or servicer to be an intimidating process. There are a large number of companies that have come to the marketplace over the past 24 months offering to help home owners lower their payments or resolve their credit issues with their mortgage lender. Not all of these companies are out to take advantage of consumers and some of them may truly offer a benefit. Their are some red flags you should be on the lookout for if you are trying to work with one of these companies:

• Do they charge a fee upfront and will they refund this if they are not successful in lowering your payment
• Do they want you to sign over the title of your home
• Do they tell you to stop making payments or not to contact your lender
• They indicate they are a government approved vendor
• They promise to help you refinance at a zero percent rate

The governments mortgage modification program is designed to help home owners who have fallen behind with their payments due to job loss or economic hardship. Home owners who have mortgages that are securitized through Fannie Mae or Freddie Mac may be eligible to explore a refinance or loan modification with their servicer or lender directly.  The lender does not have to participate in the government recent program but their is a financial incentive for them to do so as well as good business sense to help their customers avoid home foreclosure as each foreclosure the lender loses at a higher rate than almost every other alternative.