Separating Legitimate Loan Modification from Foreclosure-Rescue Scammers

If you’ve looked into loan modification as a way to save your house from foreclosure or to help you save some money, then you probably already know that it requires an upfront payment.

Whoa now, stop right there! The FTC, FCC, and consumer watchdog groups all warn against accepting any offer that requires you to pay upfront, even if it’s for an offer to do a legitimate service that normally requires payment. It’s not so much that you are being asked to pay money, but that you are being asked to pay upfront.

Scammers always ask for payment upfront because they never intend to provide you with any valuable service, and that is the exact reason why we’ve been warned for years to be wary of such offers. Turns out that many promises to save you from foreclosure and require payment upfront are, indeed, scams.

But there are legitimate services offered by legitimate companies wherein it’s the industry standard to require upfront payment. Think about the earnest money you put down when you made an offer on your house. How about the co-pay you make each time you visit the doctor’s office? Refinancing your mortgage often requires payment before it can be finalized. If you aren’t asked to pay during a refinance, it’s usually because they tack the fees onto the end of your new mortgage — which can be worse than paying it upfront because you end up paying interest on a relatively small amount of money for the entire term of your loan.

These may not seem like upfront payments because we think “upfront payment” automatically means a scam is going on. And your doctor and loan officer aren’t scammers, right?

Loan modification is another service that requires upfront payment, but has raised a few eyebrows from some concerned consumers. Because loan modification is sometimes pitched as a method to save your house from foreclosure, it unfortunately often gets lumped in with the “foreclosure rescue” scams.

So why, if loan modification is a legitimate service, do companies ask for payment upfront? Well, to start with, take an honest look at your situation. Plain and simple, you’re a high-risk client. People want to know that you are serious about saving your home before they start the process of opening loan modification negotiations. Secondly, loan modification often involves lawyers. Lawyers mean retainers. Attorney services are another industry where upfront payment is standard. But if you’ve never dealt with an attorney before, you might not know that.

In the end, loan modification performed by a qualified company or attorney is a legitimate service. The real question is whether or not it’s worth it. If you’re already behind on your payments, loan modification can make that go away. Furthermore, your interest could be lowered, your payment could come down, and you might even end up owing less overall. Most people would say it’s worth it, but that’s for you to decide.