ATTENTION HOME OWNERS

A new genre of fraud is becoming very prevalent surrounding troubled home owners, and could cost you thousands, destroy your credit, and make you loose your house. Hundreds of people have already fallen victim due to a lack of understanding surrounding loan modifications. If you are late on your loan payments PLEASE read this information prior to working with a third party to request a loan modification with your bank.

The FTC recently published on their web site that they are charging a Loan Modification company, and "foreclosure rescue" company with contempt for violating a 2001 court order.

"According to papers the FTC filed with the court, the defendants told consumers that they would stop foreclosures. They claimed they were “100% successful and had never lost a customer’s home to foreclosure” and advised consumers to pay them instead of making mortgage payments. They also claimed that they would negotiate modified mortgages with lower interest rates, monthly payments, and principal balances. The FTC charged that, in fact, they obtained few, if any, loan modifications for customers."

The truth of the matter is simple. Many lenders will not work with a third party on a loan modification at all. Lenders, however, are very willing to work with troubled homeowners. And the process, though sometimes lengthy, is really pretty simple. Borrowers who are facing a financial hardship (or who have faced one in the past) are asked to provide income, and asset documentation. Some banks require more documentation than others but the standard request would look something like this;

• Financial statement - showing assets, and liabilities
• Income Statement - showing income and expenses
• Latter of hardship - explaining what caused the problem (although many don't ask for this anymore, it seems that everyone is experiencing a hardship)
• Monthly Budget, or Bank Statements
• w2's or 1099
  

If taxes have not been filed for the current year, often the bank will request a profit and loss statement for that year. Do not try to fill these items out in advance of talking with the bank, often they want the information on their own forms, and they may not need everything.

"The ironic part of these companies that offer loan modification 'services'" explains Micah Olson of UtahMatters.com "Is that they will generally call the bank ask what forms are needed, and then have the homeowner fill them out on their own anyway. So essentially they are charging sometimes in excess of $5,000 to make a phone call, and mail a few forms."

Many companies offer a "guarantee" but when a borrower is able to get it in writing it contains ambiguous terms such as "The Company will exercise due diligence in obtaining a workout with The Lender," or some other easy out verbage. And if you do get a good, written, guarantee, will the company be around to give you the refund after your home gets foreclosed on, and further, does a refund of your fees compensate for loosing your home?

The FTC is not the only entity going after loan fraud, whoops, I mean, loan mod companies. Consumer Affairs . com reports that the state of NY has targeted 14 companies for failure to fulfill bargains, and has issued subpoenas to uncover marketing strategies, representations made to homeowners, fee structures, and "what services, if any, are actually performed."

If you are late on your payments, and could be facing foreclosure, please contact your bank directly, or contact us to get FREE advice.