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WASHINGTON (AP) -- The head of the Federal Trade Commission said Thursday the agency is considering banning upfront payments to companies that advertise help for borrowers who are in trouble on their home loans.
Government officials say scammers seeking to take advantage of borrowers in danger of default often charge upfront fees of $1,000 to $3,000 for help with loan modifications that rarely, if ever, pay off.
''If you are concerned about keeping your home, avoid any company that asks you for a large fee in advance. That is a real red flag,'' said Jon Leibowitz, chairman of the FTC. Such upfront fees are already prohibited in 20 states.
His comments came as his agency announced it filed civil charges against two companies, San Diego-based Nations Housing Modification Center and Infinity Group Services of Orange County, Calif.
The government accused both companies of charging homeowners large fees for assistance in working with their lenders, but doing ''little or nothing'' to actually help borrowers.
Separately, the agency filed additional charges against New Jersey-based United Credit Adjusters, Inc. The company, which was already targeted by the government in a credit repair scam, was accused of running a loan modification scheme under the name Loss Mitigation Services Inc.
Leibowitz said the FTC was also considering restrictions on how mortgage rescue companies can advertise their services. Ads for loan modification companies frequently appear on late-night TV and on billboards in some parts of the country. Nations Housing, for example, mailed homeowners official-looking letters purporting to be from an address on Pennsylvania Avenue in the nation's capital.
They were designed to trick consumers into thinking that they were participating in a government program, regulators said.
The government has filed charges against 22 companies operating such schemes and say the firms often have names or ads designed to make borrowers think they are using the Obama administration's efforts to help modify or refinance millions of mortgages.
Authorities emphasized that help is available for free from government-approved housing counselors.
Homeowners can locate free housing counselors at www.makinghomeaffordable.gov or by calling (888) 995-HOPE.
On Thursday, 12 state attorneys general met with U.S. Attorney General Eric Holder, Treasury Secretary Timothy Geithner and Housing and Urban Development Secretary Shaun Donovan to discuss their anti-fraud operations.
Greg's answerer is right on track. In most cases in the Inland Empire home values have dropped so much that a loan modification in the end does not work. The front end ratio (the percent of what your loan payment is and your gross income) can not exceed 30%. The banks are not giving away that much. Usually the trial period is about 3 months and after that you most likely will see little to no change. Please visit my web site tetrealestategroup.com I have two sections that might help you out. One is the Administration Plan and the other is Loan Modifications. There are local non profit groups like Springboard that can help you for free, but they take a long time. If you're all ready in foreclosure (or in default) the clock is ticking. What also works agents you now is that inventory's of homes for sale are low. Multiple offers are the norm and that is pushing home values up. My advice is to seek professional help. An attorney is the best bet but no guarantees are made and they will charge up front fees. CMAC is the best, they only charge $700.00 up front AND they are attorneys. Stay away from any "Loan Modification Companies" and don't give them a dime. Good luck!
I'll'll get this out of the way first. If you're looking for a loan modification company in Riverside I can refer you to one.Now to your question, in reviewing your loan modification request your lender is going to determine how much loan you qualify for now based on your current financial situation. Then they will see if they can get your debt to income ratios in line by first lowering the interest rate you're paying, down to a set minimum (usually no less than 3%), secondly they will see how extending the term will lower the payment. Finally, they will see if a reduction in principle balance will get the numbers in line. This almost never happens, but sometimes they will defer a portion of the principal but it will still be money you owe. Once they have a number they will usually put you in a "trial" modification for 6 months and if you are able to make all your payments on time, then make it permanent.A word of caution: more than 50% of all loan modifications become delinquent within 90 days. Most often because the modification is not a long term solution but just a "band-aid" that temporarily slows down the bleeding.You can do a loan modification yourself, but be prepared to spend a lot of time on hold and faxing and re-faxing and re-faxing paperwork.If a loan modification company is asking for their fee upfront, run don't walk away because there is no guarantee they will make anything happen for you.My contact info is available in my profile.Good Luck
There are several programs that are available. In general, you will need to prove all income and document all expenses, there are specific forms that have to be completed. You will need to write a hardship letter explaining what has changed in your life and why you now can't afford your payment. You will need to provide pay stubs, bank statements, tax returns, utility bills, credit cards bills, etc. Debt ratios will play a factor in your qualifying as well as your overall financial picture and some of the banks have subjective leeway. So, that means that if you plan on submitting your modification yourself it is really hit or miss.If you elect to hire an attorney loan mod firm your chances are much higher as far as a success rate. You can try it yourself but with all the experience from phone calls i receive on a daily basis, it can be a six to nine month process for you with no help from you bank and then a denial. If you are denied, hire a loan mod attorney firm as they can get answers usually in thirty to forty five days and wrap your loan mod up in sixty to ninety days. Oh, and the good ones have 100% money back gaurantee and almost the same in their success rate. That is due to the fact that they specialize in this stuff and can get the job done right.
You will need to provide a letter of hardship explaining why you cannot afford your current mortgage payment – from there your lender will require your financial statements (pay stubs, savings, taxes, investments) which should support your hardship letter. As long as you were truthful about your situation your lender can adjust your payments in line with your debt to income ratio. This also means that you need to be currently employed to apply for a loan modification – if your hardship is losing your job and you cant make your current payments you might need to look into other avenues – either a short sale, deed in lieu of foreclosure, foreclosure, or takings steps to prolong the foreclosure process as long as possible. Hope that helps!
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