“From the beginning I was suspicious about this company, but it really caught my attention when they asked me for a $5,000 payment - half right away and the other half when they close the deal with the bank.” Jose Gonzalez of Oakland recounts his experience of looking for a way to change his home
mortgage. Like millions of other homeowners, Jose was having some difficulty in making his monthly payment and didn’t want to lose his house. His experience is a warning to others who are not sure of what steps to take or who to trust.Jose had contacted his bank to try to reduce his monthly payments. When he didn’t get any response from his bank, he called a company in Hayward that promotes its loan modification services. “They promised to reduce the interest rate to 5% or less, with a fixed rate and also reduce the principal by 20%. They made it sound very nice.”
Jose’s hope disappeared, though, when he went to the company’s office. “From the beginning it was very strange,” he says. “There were no licenses or permits on the wall - nothing to show me that these were trusted people. But they told me that they could help me and even showed me some paper work of other loans that they have worked on.”
But Jose did not give them the 5,000 dollars they were asking for. “I did not give any payment,” he says. “I was very suspicious, and I am the kind of person that is not going to believe the first opinion. I have to listen to more people to make a decision - I want to know if it is true that I can be helped that easy.”
Loan modifications are being promoted heavily in the current real estate market. When performed by an honest mortgage company, it is a real option for many people. The homeowner and the loan provider agree to permanently change one or more of the terms of the mortgage contract to make the payments more manageable. Modifications may include reducing the interest rate, extending the term of the loan, or adding missed payments to the loan balance.
“People have to be really careful dealing with people who do loan modifications,” says Tony Mendes of local loan provider BayAreaLoanSource.com. Tony says that homeowners can go to loan modification companies or deal directly with their lender and that there are advantages and disadvantages of each. “Going directly to the lender may not cost anything, but you may not get the results you want or know the procedures of how to deal with the lender,” he says. But working with a loan modification company often requires an upfront cost with no guarantee of results. “Choose one that’s reputable, that’s been in business in for a long time,” he says. “Do your research, call the Better Business Bureau, and get references.”
The signs of a dishonest mortgage person are not difficult to see when you know what to look for.
“Consumers should be careful about anybody who instructs them not to contact their lawyer, lender, or credit or housing counselor,” says Frank Dorman of the Federal Trade Commission ( FTC), which works to prevent fraudulent, deceptive, and unfair business practices in the marketplace and provides information to help consumers identify, stop, and avoid them. “Consumers should also be especially careful about dealing with anybody who guarantees to stop a foreclosure,” adds Frank.
The easiest way of knowing a company or person is dishonest is when they ask you to be dishonest. “They told me that they will make the numbers (income) look good so the bank will not refuse to negotiate my loan,” says Jose.
As the sub-prime mortgage disaster taught many people, being an informed consumer is very important when your house or many thousands of dollars are at risk. “I prefer to ask than to be ignorant,” concludes Jose. “People have to ask, ask and ask.”
To file a complaint or to get free information on consumer issues, visit ftc.gov or call toll-free 1-877-382-4357 or call Housing and Urban Development (HUD) at 800-569-4287.