The L.A. Times reports on October 27th that a national housing nonprofit organization is launching an educational campaign to combat loan modification scams. The nonprofit, NeighborWorks, is starting the campaign in Southern California which has been hit hard by the foreclosure crisis.
So-called loan modification consultants — often attorneys, mortgage bankers, or real estate agents — often ask for up-front fees ranging from $1500 to $3000 from troubled homeowners to help them reduce their mortgage payments. These consultants promise to negotiate with the lenders to work towards a loan modification. Meanwhile, these services are provided to free for federally approved nonprofits, such as NeighborWorks.
Besides paying up-front money, troubled homeowners also lose valuable time which could be better spent with free nonprofit agencies.
“California Atty. Genl. Jerry Brown’s office has reported receiving more than 2,500 complaints against loan modification consultants and businesses through Oct. 14th of this year, up from 163 in all of 2008,” the newspaper reports.
Eileen Fitzgerald, from NeighborWorks, says that these frauds often target Seniors, Latinos, African Americans, and Asian Americans.
For the first three weeks of November, community organizers and volunteers with NeighborWorks and its local affiliate, Los Angeles Neighborhood Housing Services, will be distributing marketing materials to warn people about loan modification fraud.