New Site Helps Homeowners Avoid Loan Modification Fraud

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Loan modification scams are becoming increasingly common, but a former bank manager and loan modification expert has launched new website,, which educates consumers on how to avoid becoming victims.

As adjustable rate mortgages and a receding economy threaten millions of homeowners with a potential foreclosure, the demand for loan modification is causing many of the former predatory lenders to resurface and setup shop as loan modification providers.

"Many of the so called experts are the selfsame perpetrators who originated most of the toxic, or even fraudulent loans in the first place," according to former bank branch manager and loan modification expert Steve Aranda, author of The Complete Guide to Loan Modification.

Loan modification is a process by which any homeowner can renegotiate with their current mortgage bank to get their payments or interest rate reduced, and in some cases even obtain a principal reduction in which their mortgage balance is brought down.

A recent report released by Mortgage Asset Research Institute found that mortgage fraud had increased by 45 percent in the second quarter of 2008, as compared to the previous year. And the FBI has reported that the number of mortgage fraud complaints nearly tripled in 2009 as compared to 2005.

Mr. Aranda has launched a new website,, to teach people how to do their own loan modifications, saving thousands of dollars in fees and avoiding the risk of falling victim to loan modification scams. The kit includes a book, video, software, and forms for any borrower
to complete their own loan modification themselves.

Many of the loan modification scams revolve around up-front fees, according to Aranda.

However, unless you are an attorney, an up-front fee cannot be collected after a Notice of Default has been filed. Furthermore, even before the Notice of Default, only companies who have submitted specific documentation to the Department of Real Estate for review are able to collect fees before any services have been rendered, and even then only under specific circumstances.

Aranda estimates as many as 60 percent of all loan modification companies are
practicing illegally, often using non-attorney processing companies to
negotiate for them without having legal counsel on staff.

Numerous companies are scrambling to get into the lucrative loan modification market now; in California alone, there are almost 200 companies legally able to do loan modifications in the state - up from under 30 companies several months ago. Unfortunately, there are also many companies who are not legally able to do loan modifications but who do them anyway, taking advantage of homeowners who are desperate for a solution.

"For homeowners with a problem mortgage, there are actually several options besides loan modification, including forensic audits, short sale, deed-in-lieu of foreclosure, or even a reverse mortgage for seniors over age 62," states Aranda. A forensic audit is a review of the initial loan documents, looking for loan fraud or problems as a means to force a lender to settle and accept better terms.

Aranda recommends any homeowner in trouble or expecting a mortgage adjustment should investigate all their options before doing business with anyone advertising loan modification.


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