Loan Modification Scams

Many people who are trying to save their homes from foreclosure become victims of scammers. Loan modification scams promise a way to save one’s home or get quick cash, only to have the scammer taking control of the property, stripping equity, or collecting a large fee.
Scams are always changing and evolving; as soon as the authorities crack down, scammers come up with new methods. Some common scams:

  • Fake government aid—some scammers collect fees in advance for access to government help, but they have no affiliation with the US Department of Housing and Urban Development (HUD) or any branch of the government.
  • Foreclosure rescue scam—some scammers pretend to be legitimate counselors, offering to negotiate for homeowners in exchange for an upfront fee. Some scammers tell homeowners to stop talking to their lender; this is always a bad sign.
  • Fake lawsuit—some law firms get homeowners to hand over all of their personal info and a hefty fee by claiming they will represent the homeowner in a lawsuit against the lender.
  • Bait and switch—this scam steals property by getting the homeowner to sign the deed for the house over to a scammer under false pretenses. They may offer a rescue loan or the like, but really they’re having you sign a transfer of title.
  • Rent to own scam—a lender takes your home, but offers to let you stay in the property as a renter. In some cases, they promise to let you purchase the home back eventually after your finances recover, but scammers set impossible terms, making the home impossible to recover.
  • Scam short sale—Short sales can be a legitimate form of relief, but scammers can charge a fee to “expedite” the sale. Only your lender can approve of a short sale, and upfront fees charged by scammers are usually illegal.
  • Bankruptcy scam—A scammer may tell you that there is a refinancing negotiation under way, but really they are declaring bankruptcy on your behalf. The bankruptcy filing stops the foreclosure long enough for the scammer to collect fees and disappear, leaving your finances in ruins.

How to avoid scams:

  • Seek legitimate housing counseling. Contact a HUD-approved housing counseling agency. HUD conducts rigorous audits; so current HUD approval is a good sign of integrity. COA (Counsel on Accreditation) is also a good sign.
  • Use licensed help. For options like short sales, all agents involved need to be a licensed real estate professional or attorney.
  • Thoroughly read all documents. Most scams work by getting you to sign documents you don’t review fully. Before signing, contact a HUD-approved housing counselor to review everything before you sign.
  • Contact your lender. If anyone tells you to stop making payments or stop contacting your lender, that’s a bad sign that you may be talking to a scammer. Always maintain communication with your lender. A housing counselor can talk to your lender on your behalf, but never keep your mortgage company out of the loop entirely.
  • Don’t pay up front. If anyone tries to collect an up-front fee for services, talk to your housing counselor first. Some services do have legitimate fees, but many loan modification programs should be free of any charge. A HUD-approved housing counselor can help you know which fees are legit and which are scams.
  • Pay your lender. Be wary of anyone who has you send your mortgage payments to them instead of to your lender. Talk to your lender before sending a payment to make sure you’re submitting it properly and that it will go to the right place.

Reporting scams

If you think you’ve already been victimized or you spot a scam in progress, take steps immediately.

  • Call a HUD-approved counselor. Housing counselors can help you take the appropriate action, including the following:
    • Call the Hope Hotline at 888-995-HOPE
    • Call the FTC (Federal Trade Commission) at 877-FTC-HELP
    • Call your State Attorney General’s office


If you have any questions, remember, a housing counselor is the best place to start. They have all of the resources at their disposal to help you avoid, recover from, or report scams.


For more information, you can always visit HUD’s “Prevent Loan Scams” page. is a HUD approved housing counseling agency. We have worked for 40 years to build a legacy of trust, and our advisors are standing by to offer help. Call us today for housing counseling or foreclosure help. You can start online or call our homeowner hotline at 800-294-3896.