Avoiding mortgage modification scams
By Ana Ribeiro • Bankrate.com

Homeowners facing foreclosure have one more thing to worry about: loan modification scams. 

Normally, homeowners seek loan modifications in hopes of forestalling foreclosure. However, scam artists have seized the opportunity to use phony loan modification schemes to prey on vulnerable borrowers. 

"The real unfortunate aspect of the foreclosure rescue scams is that it makes an already stressful and tough situation more stressful and more difficult," says Josh Fuhrman, director of counseling for the Homeownership Preservation Foundation, which works with credit counseling agencies to educate and counsel at-risk homeowners.

Unscrupulous individuals are targeting at-risk homeowners by combing foreclosure notices in newspapers, the Internet and public files to identify potential victims, according to the Federal Trade Commission.

These con artists advertise through TV and newspaper ads or on posters with attention-grabbing phrases, such as "Stop foreclosure now!" or "We guarantee to stop your foreclosure!"

The following are four ways to avoid being scammed.

Be skeptical
Scammers often work hard to present themselves as legitimate. For this reason, it's important to be extremely wary, even when a solicitation or correspondence looks official, says Kimberly Allman, housing counselor at the New York Mortgage Coalition.

"Homeowners should be cautious of Web sites or companies with names similar to legitimate government programs," she says. "Many scammers are presenting themselves as affiliated or associated with the government when that is not the case."

In one typical example, scammers use a letterhead that supposedly indicates the correspondence is from the Obama administration's Making Home Affordable plan, says Dianne Reichel, group manager and a credit counselor at GreenPath Debt Solutions Inc.

"Scammers will use deceptive marketing practices that convince consumers (into) believing they are contacting reputable organizations," Fuhrman says.

Allman says such tactics are widespread.

"Almost every homeowner who calls me and is behind on his mortgage tells me that he has been approached by someone offering loan modifications for upfront payments of around $2,500 and $3,000," she says.

So how can homeowners ensure they are talking to a legitimate source of help?

Douglas Robinson, spokesman for NeighborWorks America, a national nonprofit organization created by Congress to provide support to community revitalization efforts, suggests the following tips:

• On the Internet, stick with Web sites officially associated with the government. Most of these sites have URLs that end with the "gov" domain name. Examples include the Making Home Affordable official Web site and the Web sites of federal agencies such as Housing and Urban Development.
• When talking to someone on the phone, you should feel comfortable asking for and receiving the main number of the agency that the caller represents. That way, you can call back to make sure the number is legitimate.
• Government agencies will never ask for personal financial information upfront, or request fees at any time. Borrowers should be suspicious of anyone who makes such demands.
• If you're seeking extra reassurance, visit the local office of the government agency in question. Scammers don't set up shop in federal office buildings.

Don't pay for help
HUD-approved counseling agencies offer free foreclosure prevention counseling. In contrast, scammers request fees to help desperate homeowners.

Typically, scammers charge a homeowner exorbitant fees while promising assistance that will supposedly save the owner's home. Instead, these crooks take the money and run.

"This scam is the most prevalent within the industry," Fuhrman says.