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How Attorneys Can Protect Financially Distressed Homeowners from Mortgage Modification Scams

How Attorneys Can Protect Financially Distressed Homeowners from Mortgage Modification ScamsHomeowners often face financial hardships that threaten their ability to make their mortgage payments on time. Because the family home constitutes the most significant asset for many households, the prospect of foreclosure can be an alarming possibility. Fortunately, a range of options including loan modification programs provide viable options that have enabled many people to become current and keep their residence. The glut of foreclosures in recent years also has prompted opportunists to exploit distressed homeowners with loan modification scams. Given this trend, the Washington State Department of Financial Institutions (DFI) has advised homeowners to exercise caution when relying on a service provider to work with their lender to modify their home loan.

Although there is no law in the State of Washington that prohibits businesses from offering loan modification services, the risk of exploitation by a scam artist increases significantly if you do not work with an attorney licensed in Washington. While certain other entities or individuals might offer such services, consumers benefit from a number of safeguards when they work with a Seattle mortgage attorney. Lawyers are subject to strict ethical rules, and violations can result in professional discipline that includes suspension or revocation of a law license. If you retain a law firm, you can check the law firm’s status with the state bar association in Washington to confirm that a potential mortgage modification lawyer is in good standing and without a record of discipline.

Along with working with a licensed attorney, there are a number of other steps that consumers can take to avoid loan modification scams.

1. Exercise Caution in Fee Arrangements: Generally, you should never permit a loan modification service provider to have direct access to your credit card or checking accounts. When working with our loan modification attorneys, you will have the opportunity to consider a written fee agreement that will clearly indicate your fee terms whether based on hourly billing, flat fee, or other terms. Homeowners should be suspicious of businesses/individuals who charge large upfront fees for loan modification services. The Federal Trade Commission (FTC) Mortgage Assistance Relief Services Rule prohibits advance fees for services that provide assistance in reinstatement, modification, or refinancing of a mortgage. While attorneys can charge a fee in advance, specific requirements apply, and the fees must be handled through a client trust account.

2. Review All Documents: Distressed mortgages need to read and understand all documents before signing to avoid being surprised with unfavorable terms later.

If you do not understand any terms, you should seek clarification especially if you are not working with a law firm.

If you are behind on your mortgage payments and facing the ominous specter of a foreclosure, we provide legal advice and representation to financially distressed homeowners. To schedule a consultation with a Seattle mortgage attorney, call the Dickson Frohlich Phillips Burgess today at 253-572-1000 or send us an email at