Subprime brokers now in the loan modification business, consumers duped by promise of security for homes.

Most of us have seen at least one infomercial on TV that has tempted us to pick up the phone an order a product.  We are tempted by the hope that the product will make our lives easier or better.  Eventually, one of the local TV stations will run a program and tell us that the product is a deal or a dud.  The latest dud was reported by the New York Times.

The collapse of the housing boom has been largely attributed to subprime mortgages.  Since the collapse, many brokers have shifted from subprime mortgages to the mortgage modification business.  They use the desperation of consumers to sell their loan modification programs.  They target people who are at risk of loosing their homes with the alluring promise of a better deal.  One broker, according to the Times, described the ease of the transition.  The article stated:  “‘We just changed the script and changed the product we were selling,’ said Mr. Soussana, who ran the Los Angeles sales office of Federal Loan Modification Law Center.  The new script:  You got a raw deal, and ‘Now, we’re able to help you out because we understand your lender.”

These loan modification companies frequently require substantial amounts up front.  Many people have opened new credit card accounts to pay for their hefty deposits hoping to save their homes.  According to the article, many of the for profit loan modification companies “fail to deliver.”  Consequently, the Federal Trade Commission has begun filing lawsuits and issuing cease and desist orders to prevent these types of companies from preying on desperate consumers.

When it comes to your home, regardless of how desperate your situation is, understand all your options and be aware of the risks.  Just because a company has the word “federal” in its name does not necessarily mean they are with the federal government.  One of the major modification companies targeted by the FTC is called FedMod.  As with credit counseling organizations, we wary of any firm that requires large sums up front and promises exaggerated results.  Keep the old adage in mind that if it sounds too good to be true, then it probably is.

These companies are very persuasive.  Before signing anything, read it and understand it.  If you don’t understand what you’re agreeing to, then don’t sign.  Along the same lines, don’t assume what you signed.  Many people are overpowered by a good hard sell and will usually just initial whatever papers are pushed in front of them.  Resist the sell and ask more questions.  Request copies to review before you sign.  Finally, always get a second opinion.  Many people won’t be helped even by legitimate loan modification programs because they are so overwhelmed by debt.  The expense of the loan modification process will only aggravate an already stressed financial situation.

Your mortgage may not end up being discharged in bankruptcy, but you can still get relief to save your home through the process.  If your home is at risk, contact a qualified bankruptcy attorney and explore all of your options.  Your home and your family deserve better answers.  Don’t be duped by a dud.