Mortgage Modification Scams Causing Homeowners More Financial Problems - New Warning

A major Detroit-based bankruptcy lawyer warns anyone considering defaulting on their homes not to fall victim to several mortgage modification schemes that get homeowners into more serious financial calamity.

“People are desperate when they apply for these mortgage modifications,” Attorney Michael Greiner said. “As a result, these people are falling into so-called solutions that leave them in worse shape than they were when they started.”

Greiner warns homeowners watch out for three main pitfalls that are bad for homeowners’ financial health. He suggests homeowners pay special attention not to fall behind on payments in the hope the lender will be more open to deal, that they do not pay someone to re- negotiate the mortgage, and not to suggest “settling” your second mortgage.

Industry experts say only 1 in 10 mortgage modification requests end up beneficial to the homeowner. Mortgage firms modify their loans in only rare circumstances leaving about 90 percent of those mortgage modification applicants further in debt due to missed payments, service fees, and late penalties. Only 450,000 mortgage modifications have been issued in contrast to 6 million recorded foreclosures.

Homeowners should never pay for help with a mortgage modification. These companies are scams and anything they promise, the homeowner can negotiate for themselves with their mortgage company.

Second mortgages and there re-negotiation can be problematic as well. The dollars saved in the value of a mortgage is usually then considered income that is taxable. The homeowner would be faced with a considerable tax expense erasing any savings from a settlement.

In almost all cases, when facing foreclosure, it is wise for homeowners to seek the advice of a bankruptcy lawyer.

Greiner suggests to homeowners that have missed several payments to always research and consider all options available. “Don’t put yourself in worse shape by falling into one of these traps.”