"Equity Is No Longer The Game" - Loan Modification Scams Proliferate As Home-Snatching Equity Stripping Scams Subside

A recent report by the National Consumer Law Center makes this observation on the current state of foreclosure rescue scams:

• Homeowners facing foreclosure have always been vulnerable to scammers, con-artists, and thieves. Whether desperate for options or frustrated by uncooperative mortgage servicers, many homeowners are attracted to slick advertisements with bold promises to rescue them from foreclosure. When property values were appreciating rapidly, foreclosure rescue scams primarily focused on obtaining title to the home and robbing homeowners of their equity.(1)

• Today with property prices depreciating and many homes already "underwater," equity is no longer the game. Instead, rescuers have become high-volume, "loan modification specialists." The pitch by this new breed of predators is that, for a fee, which can reach several thousand dollars, they will negotiate a loan modification for a financially distressed borrower. The hitch is that the "work" performed, if any, leads nowhere, with the homeowner out money and time and closer than ever to foreclosure.

• These loan modification companies are flourishing because mortgage loan servicers cannot or will not provide borrowers with timely and consistent information regarding their requests for loan modifications. Frustrated by the lack of responsiveness on the part of the servicers, borrowers across the country are giving loan modification companies their precious dollars with disastrous consequences.

For the NCLC report, see Desperate Homeowners: Loan Mod Scammers Step In When Loan Servicers Refuse To Provide Help (July 2009).

(1) See Dreams Foreclosed: The Rampant Theft of Americans’ Homes Through Equity Stripping Foreclosure ‘Rescue’ Scams (June 2005).