Loan modification scams aren't new, in fact we've reported on them previously . But to reach new victims and steal more of their money, scammers continually try new approaches—one involves using an attorney (real or imagined) as their front.
"What makes these frauds unique is that they claim to have a lawyer involved and their documents and websites look very legitimate and official," explains Yolanda D. McGill, an attorney with the Lawyers' Committee for Civil Rights Under Law, a national non-profit monitoring mortgage modification scams.
The scammer might offer a "second look" to homeowners turned down for a modification by their mortgage company and guarantee results. In reality, most of these victims will never actually speak to or meet an attorney. All communication will be through an intermediary or 'processor' who sets up monthly draws from the victim’s bank account or credit card to cover the fees.
It Can’t Happen to Me
That's what struggling homeowners across the U.S. thought last year when over $90 million* was lost to mortgage scammers (and that's just counting the scams that were reported).
According to McGill, attorney-related scams can cost more and go undetected longer (sometimes months and even years) because people are reluctant to question an attorney's authority. Whereas the average homeowner loses $3,000 to a modification scam, those falling prey to attorney-related scammers lose $4,000 or more.
According to McGill, it's important that homeowners in danger of foreclosure realize they are scam targets and only work with trusted sources, such as their mortgage company (the company that collects their monthly mortgage payments) or a HUD-approved housing counseling agency.
Also, there are a few red flags. You might be a scam victim if you are:
- Being asked to pay anything upfront or provide your bank account or credit card information. "This is one instance where free help from a HUD-approved housing counseling agency is really the best way to go," advises McGill. If you need help, contact the Homeowner's HOPE™ Hotline at 888-995-HOPE or find a HUD-approved housing counseling agency using HUD's website .
- Being contacted by an out-of-state firm. Check an attorney's credentials with your state bar; attorneys who work with struggling homeowners must be licensed to work in the state where you reside (or where your property is located).
- Being told to pay the scammer and not pay your mortgage. "Despite what a scammer will tell you, you should never send a mortgage payment to anyone other than your mortgage company," says McGill.
- Being pressured to sign over the deed to your home or sign any paperwork you haven't read, don’t understand, or has blanks.
- Being asked to provide personal financial information by fax, online, or over the phone. You should only give this type of information to companies that you know and trust, like your mortgage company or a HUD-approved counseling agency.
If you think you've been victimized or have information about suspected scamming operations, use the Loan Modification Scam Prevention Network online complaint form  or call the Homeowner's HOPE Hotline. Some state bar associations also have online forms to file a grievance against a lawyer who has not adequately represented you to try and get your money back.
Attorney-related scams work because they target people who need help and feel they have nowhere to turn. "They are targeting people who may have already heard 'no' from their lender (for a loan modification), they are selling promises and fantasies, and downright lying to people," notes McGill. "It’s hard for these homeowners to understand that someone lied to their face and stole their money."
*Editor’s Note: Mortgage scams amounted to $90 million last year, not $90 billion as previously reported. Please accept our apologies.