FTC Takes Up Fight Against Mortgage Modification Scams

Loan modification scams are in the news - again. For my part, I've been warning my Indiana bankruptcy blog readers and my bankruptcy clients about foreclosure prevention scams. The Indiana Attorney General's office has been issuing warnings as well.

In a typical scenario, scammers collect upfront fees from homeowners, promising to negotiate on their behalf with mortgage lenders. The scammers then disappear with the money, without ever providing any services. Attention to scams is now focused on a national level, with the Federal Trade Commission considering a ban on upfront fees for foreclosure prevention services. (Such fees have already been banned in 20 states.)

The FTC is also scrutinizing the way foreclosure prevention services are advertised. Some companies send promotional literature in envelopes designed to look as if they are coming from a government agency. Scammers often try to take advantage of the fact that the government is indeed offering programs to help homeowners negotiate with lenders about modifying the terms of their mortgage loans.

Two weeks ago, a dozen state attorneys general met with U.S. Attorney General, Eric Holder and Treasury Secretary Geithner to discuss the problem. Meanwhile, here in Indiana, I am doing my best to help. First of all, I try to raise awareness of the fact that certified mortgage counseling is available through the Indiana Foreclosure Prevention Network (consumers can call 1 877 GET HOPE).

Second, in each of my four bankruptcy law offices around the state of Indiana (Anderson, Bloomington, Columbus, and Indianapolis), we offer no-cost, no-obligation discussion of foreclosure prevention options. Sometimes the very fact that a letter arrives on a law firm's stationery helps facilitate a response from a mortgage lender.

No one can guarantee that your lender will be willing to change the terms of your mortgage. But, whatever strategy turns out to be the most practical for your specific situation, it can really help to review all your options with a legal advisor!