CFPB Warns of Mortgage Modification Scam

The housing market has been slowly recovering for most of the year, but the fact remains that millions of Americans are still underwater when it comes to what they owe on their mortgage versus the value of their home. As such, many may be looking for some relief, and scammers are now preying on that need.

In recent weeks, the federal Consumer Financial Protection Bureau brought down a pair of allegedly widespread mortgage modification scams that targeted consumers who were underwater on their home loans, according to a report from the agency. In total, the scams could have had as many as several thousand victims across the country, and ripped them off for more than $10 million.

In particular, the alleged criminals in this case were accused of illegally charging up-front fees, claiming to be affiliated with government agencies or programs, misrepresenting their ability to obtain mortgage modifications and telling consumers to stop paying their mortgages or contacting their lenders, the report said. The first and last of these actions can have significant adverse effects on a borrower’s financial and credit standing.

“It is absolutely unacceptable for unscrupulous con artists to take advantage of our nation’s housing crisis by targeting homeowners looking for help from the Troubled Asset Relief Program’s Home Affordable Modification Program,” said Christy Romero, special inspector general for TARP. “We thank the CFPB for protecting homeowners. SIGTARP will continue to stop these scams and educate homeowners that mortgage modifications through HAMP are free.”

As such, the agency would also like to remind consumers that if anyone contacts them pretending to be from a government program, such as the Home Affordable Refinance or Modification Programs (HARP or HAMP), but try to charge you for their services, that’s a clear sign of a scam, the report said. The government initiatives do not charge Americans for any help they provide in the way of counseling, or either refinancing or modifying their home loans.

In general, there are many ways that identity thieves and con artists attempt to rip off consumers by phishing for personal or financial information. This can be done in person, by phone, email, and even text messages. Typically, if someone asks for money up-front for services, or asks a person to “confirm” account information, that’s usually a sign of a scam.