Watch Out for Loan Mod Sharks

We all know there are lots of people struggling to keep their homes today. Unemployment, layoffs, bailouts, foreclosures, and loan modifications are probably some of the most common words in the news, and have been for a while.

Shouldn't You Get Professional Help?

For some people who have certain types of loans a loan modification is a real option, but large numbers of people in distress tends to bring out the scammers. Who can you trust to help in your loan modification negotiation? Normally, the safest answer would be to consult with an attorney.

Pros Gone Bad

That's what makes today's announcement by the State Bar of California so disturbing. They've publicly identified 16 attorneys who are under investigation for misconduct related to loan modifications. The charges against them include taking a fee for services and then failing to perform those services - or even further communicate with the client!

The Office of Chief Trial Counsel experienced a 58% increase in active investigations compared to 2008, and 25% of them involve loan modification.

What to Watch Out For

If you or someone you know is having trouble making mortgage payments loan modificaiton might be a good option - but just be sure you are working with someone you know you can trust. Get references, and check them! In addition, the State Bar has identified a list of "red flag" circumstances that could be a sign something isn't right:

• Advertisements of the office do not expressly identify by name the attorney who is responsible for the business.
• Office staff will not readily identify by name the attorney responsible for oversight of the business.
• The attorney in charge of the office is too busy or not willing to meet personally with prospective clients.
• The firm advises a consumer to stop paying the existing mortgage.
• The business, through its advertisements or claims of its representatives, makes claims that sound too good to be true, such as claims of a 90 or 100 percent rate of success in obtaining loan modifications, or claims that a reduction in the mortgage principal is likely to be achieved.
• The business demands payment of a large fee, even before obtaining a prospective client’s basic income and expense information, and information about the existing mortgage and present home value.
• The attorney responsible for the business is not licensed to practice law in the state where the consumer resides.

Are There Other Options?

One thing to keep in mind is that a loan mod may not even solve the matter for a home owner in distress. Check out this list of all the various options, as well as a FAQ on Short Sales, and remember to work with someone you know has a track record of success!