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Loan Modification Scams a Problem in Illinois

Posted on in Bankruptcy Attorney

During the financial crisis of the 2000s, severe issues with the housing market came to light and many Americans found themselves with mortgages worth more than their homes. This is known as an “underwater mortgage,” and, according to Investopedia.com, “combined with a bad economy, resulted in numerous foreclosures” during the “aftermath of the 2000s housing bubble burst.” Many homeowners felt they had no choice but to default on their loans, as if defaulting form the mortgage was actually “cutting the losses from a bad investment.” It's not surprising, then, that loan modification rose as a viable alternative to defaulting on a mortgage, and several companies sprung up around the country offering services to help modify a mortgage loan. And yet with the myriad of upstanding companies to offer this type of service came a slew of scams that further complicated the housing crisis.

According to the Illinois Department of Financial and Professional Regulation (IDFPR), “the Division of Banking has seen an increasing number of advertisement, direct-mail solicitations and other marketing materials offering consumers assistance in negotiating resolutions of the delinquent residential mortgage loans with lenders and servicers, frequently in exchange for up-front fees.” These are the loan modification scams that the IDFPR specifically warns against.

According to the IDFPR, there are four things to keep in mind when considering loan modification:

  • you'll never be asked to pay a fee to get assistance or information from a HUD-approved housing counselor
  • paying up front for a service you've not yet received is never a good idea
  • never sign over the deed of your house in exchange for a promise that the house can be “saved”
  • never pay mortgage payments to a company other than your mortgage company without specific approval

The best alternative is to seek the counsel of a qualified attorney to begin the loan modification process. Don't go through it alone. Contact a dedicated Cook County lawyer today.

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