Consumer Advocates Warn Veterans of Mortgage Modification Scams

With Memorial Day in the rear view and the July 4 holiday around the corner, consumer advocates recently issued a warning to military homeowners: Watch for mortgage scams.

Craven companies that prey on veterans will often target troubled homeowners with offers of mortgage modification, foreclosure prevention and more. Some actually present themselves as part of the Home Affordable Modification Program (HAMP), the government program that helps struggling homeowners lower their monthly mortgage costs.

“Members of the armed services community often face unique financial challenges and are at particular risk for this type of scam,” Christy Romero, special inspector general at the Office of the Special Inspector General for the Troubled Asset Relief Program, said in a news release. “We want to empower service members and their families with information so that they can easily recognize and avoid these scams and also provide them with resources on where to turn for additional information and assistance."

Signs of Scams

Under the HAMP program, eligible homeowners can have their mortgage payments lowered to 31 percent of their monthly pre-tax income. This type of modification can save people hundreds of dollars per month and help stave off foreclosure. There's a separate HAMP option for VA homeowners. But not all lenders participate in the program.

Scammers will target veterans under the guise of helping them through HAMP. Some of the more common tactics include:

• Using official names or logos of government agencies, nonprofits and lenders
• Promoting an incredibly high success rate for modifications
• Soliciting an up-front fee

The last one is especially egregious. Scammers will promise to save your home or get your mortgage under control for a price. It's actually illegal in most cases to charge for a loan modification. Veterans wind up getting fleeced and pushed deeper into trouble.

Free Help

The reality is there's free help for military homeowners in need. The Department of Housing and Urban Development has trained home counselors, and veterans can also contact their nearest VA Regional Loan Center.

If you think you are the victim of or have been contacted by a loan modification scammer, contact the Special Inspector General for the Troubled Asset Relief Program hotline at 1-877-744-2009 or visit www.SIGTARP.gov/pages/hotline.aspx. You can submit the information anonymously.

You can report loan modification scams unrelated to HAMP through the Consumer Financial Protection Bureau.

"There are plenty of legitimate, free resources for you if you are looking to modify your loan," said Holly Petraeus, assistant director of the CFPB's Office of Servicemember Affairs.