Do not pay upfront fees for a loan modification. Homeowners have been warned about this repeatedly through numerous education campaigns. Despite the warnings, scam stories of borrowers who paid $1,000 to $5,000 for a loan mod but received nothing in exchange are widespread.
"People are starting to pick up on the fact that an upfront fee is illegal," McGill says. "But the scammer will say 'we are not charging you for the services but for doc preparation,' or they'll offer you a 30-day money-back guarantee."
Many borrowers fall for the promises, especially when they are dealing with what sounds like a government program. Mortgage scams will use abbreviations and program names like HAMP, HARP, Hope Now, EHLP -- you name it and a scammer will most likely try to use it.
Borrowers also are fooled by professional appearances, McGill says. As with all other professions, you will sometimes find there are unscrupulous lawyers and mortgage professionals.
"They think because they saw it on a TV commercial or (because) it sounds like a law firm it's legitimate, but that's not the case," she says.