Government Uncovers Internet-Based Mortgage Refinancing Scams

Most people turn to the internet when they need difficult questions answered. Americans facing foreclosure are no different.

Unfortunately, many homeowners have been taken advantage of by internet scam artists who promised to help them pursue home loan modifications. The federal government has launched a investigation into the practices.

In November, the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) announced that it had shut down 125 internet-based schemes that fraudulently claimed to help troubled homeowners qualify for the federal government's Home Affordable Modification Program.

The scammers set up search engine ads on Google, Bing and Yahoo that would appear when someone entered search terms such as " stop foreclosure" or other related terms.

According to SIGTARP, homeowners who responded to the ads were asked to pay an up-front fee for assistance. The scammers then recommended homeowners stop paying their lenders and instead deposit their mortgage payments in an escrow account. The scammers diverted the mortgage payments to themselves, and in many instances stole property deeds or other sensitive information.

In the wake of the investigation, Google suspended its relationship with more than 500 advertisers. Yahoo and Bing have suspended more than 400 relationships.

Be on the Lookout for Scams

The Home Affordable Modification Program can be a great option for many homeowners. But, they need to be careful to make sure they are not working with an illegitimate refinancing company.

There are some steps homeowners can take to avoid falling prey to a mortgage refinancing scam. For example:

  • Seek loan modification directly through your lender or through a HUD-approved counselor
  • Be wary of anybody who tells you there is a fee to participate in a government-backed loan modification program
  • Do not work with a refinancer who tells you to stop paying your mortgage or to break off contact with your lender

Borrowers who are behind in their mortgages and facing foreclosure would be wise to contact a bankruptcy attorney who can explain other strategies that can help them stay in their homes.