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Were You Pre-Approved for a Loan Modification? Or Is It a Scam?

Millions of homeowners woke up in their homes this morning thanks to a loan modification. When the threat of foreclosure loomed due to the loss or reduction of income, illness, divorce or other reasons, loan modifications lowered mortgage payments and helped many families stay in their homes and communities.

But did you know scammers are sending fake loan modification packages to get money? More homeowners are learning about the Mortgage Assistance Relief Services (MARS) rule, which made it ILLEGAL to be asked to pay money – for any reason – before the lender approves a loan modification in writing. So scammers created a new trick.

NeighborWorks America wants homeowners to know that scammers may “impersonate” the lender by mailing fake loan modification packages to make the homeowner think the lender has pre-approved a loan modification. The approval may be on letterhead that looks like lender letterhead, and some borrower information may even be accurate. But the contact information will not be from your lender, and there is usually a payment request to start the loan modification. Scammers will ask for these payments – trial payments, reinstatement or processing fees – to be sent to an address not affiliated with your lender or via wire transfer to finalize the modification. This is a scam. 

What can you do? There are five steps to protect yourself from this fake loan modification scam.

1. If you want a loan modification, contact your lender and ask for the Loss Mitigation department.
Only a lender can grant a loan modification. Call the phone number on your mortgage statement to start. Include your full name and loan number on every page, front and back that you email, mail or fax to the lender. If you receive a loan modification package in the mail, confirm that your lender sent it to you.
2. Call the Homeowner’s HOPE Hotline at 1-888-995-HOPE (4673) for free help.
Trained counselors are available 24 hours a day to provide assistance in multiple languages. You can also request a local HUD-approved counseling agency to find out what mortgage options are available in your city. Instead of a loan modification, you may qualify for other mortgage assistance programs.
3. Do not pay any money BEFORE a loan modification is approved by your lender.
Verify that the loan modification package is from your lender by calling the phone number on your mortgage statement. The MARS rule makes advance fees illegal. Attorneys may charge, but they must be licensed in your state and the fees must be placed in a client trust account.
4. Avoid promises or guarantees to get your loan modified or stop a foreclosure. No one can make this promise. A “money-back guarantee” is unnecessary since advance fees are illegal.
5. Avoid companies that tell you to stop paying your mortgage or send payments elsewhere.
Being told to stop paying your mortgage or to send your mortgage or other payments to anyone besides the lender is a sure sign of a scam.

To learn more signs, visit NeighborWorks America’s Loan Modification Scam Alert website at