Uncle Sam wants you--to watch out for mortgage scams
January 31, 2011
Current mortgage rates offer the best hope for people who are struggling to meet their mortgage payments. Unfortunately, there are plenty of people out there selling false hope, in the form of foreclosure avoidance scams.
The dilemma is this: current mortgage rates are low enough that they could reduce the monthly payment on many existing mortgages, but if those homeowners owe more than their home is now worth, or have damaged credit, they may not qualify for ordinary refinancing. This may require more extreme action, such as negotiation with a lender. However, before you enlist third-party help with that process, here are five things the Federal Reserve suggests you keep in mind:
- Work only with a non-profit, HUD-approved counselor. The Department of Housing and Urban Development (HUD) has a list of approved agencies you should turn to if you need mortgage counseling.
- Don't pay an arm and a leg. Some predatory firms may offer solutions costing hundreds, or even thousands of dollars, but many agencies on the HUD-approved list will work for little or no fee.
- Be wary of "guarantees." Negotiating with lenders is a tricky process, so be wary of anyone who offers a "sure thing" solution.
- Know what you are signing--and make sure you sign it. Shy away from anyone who tries to get you to sign paperwork you haven't had a chance to review thoroughly, or asks you to sign blank forms that they will fill in later.
- If it sounds too good to be true, it probably is. Current mortgage rates may give you a legitimate opportunity to lower your payments by lowering your interest rate. Beyond that, be aware that negotiating to reduce the principal on your loan is likely to have tax and credit-rating impacts, and solutions that seem to just make the problem go away are almost certainly scams.
Mortgage problems create a great amount of pressure on a household--even more so than other financial difficulties, because they threaten your home. When faced with those difficulties, it is important to act rationally and systematically, rather than panic into a solution that will make the problem worse.
