Your BBB is hearing that people are receiving mailings from companies throughout the U.S. promising to reduce mortgage rates, and that they are pre-qualified for a modification loan. All the person has to do is send the company the set-up fees. The mailings say a lot of paperwork is not required and in some instances no paperwork is necessary. The red flag is --- send money up front. This could be a scam. Do not ever send money upfront for a loan.
There also can be a big unpleasant surprise when applying for an authentic government mortgage-assistance loan, better known as a loan modification. Your credit score can drop from the 700s to the 300s.
A friend told me about applying for this type of loan seven months ago. The company told her that it would take about three months to complete the process. With the new loan her monthly mortgage payments would be at least 50 percent less. She was advised to send in the estimated new mortgage payment.
At six months, she went to a bank to apply for a business loan. Without her knowing it, her credit score had plummeted from the 700s to the 300s. Of course, her business loan was denied.
With this unpleasant surprise, and the fact this friend had been battling with the mortgage company for months to complete her loan, she became depressed. The mortgage company had lost her loan application several times and kept changing loan officers assigned to her account.
Finally, after seven months, the loan was denied. The company wanted her to pay $6,000 to cover the monthly mortgage payments that existed from her original mortgage. They demanded the money in order for her to continue to stay in her home.
Modifications loans can work for some people. But, be sure you check with the BBB before doing business with the company. Understand the loan process and the potential ramifications to your credit score.