(MoneyWatch) The plunge in U.S. housing prices that followed the financial crisis left millions of homeowners desperate for mortgage relief -- and vulnerable to being scammed. Among the targets of this fraud: U.S. military personnel.
Officials with the U.S. Treasury, the Consumer Financial Protection Bureau, and other regulators recently warned of schemes aimed at soldiers who have sought mortgage assistance under the federal Home Affordable Modification Program (HAMP). "Members of the armed services community often face unique financial challenges and are at particular risk for this type of scam," said Christy Romero, who heads the Office of the Special Inspector General for the Troubled Asset Relief Program, in a statement.
According to a 2003 National Consumer Law Center report, fraudsters pushing bogus loan-modification offers prey on military personnel for several reasons:
A guaranteed paycheck. Soldiers get paid by the government and are in no danger of being laid off. This is a golden ticket for scammers looking for targets with ready sources of cash.
Large population of young adults. The military has a higher-than-average number of young adults who are "economically unsophisticated," according to the NCLC. In other words, they aren't great with money and aren't sure what to watch out for. And, like the civilian population, young people who own homes may not know everything they need to about their loan, making them susceptible to scams.
Military culture. As part of good conduct codes, servicemembers are required to keep their finances in good order. Journalist First Class Martin Wright of Naval Forces Europe Public Affairs writes in an article for the U.S Navy's website that, "Ironically, it is often attempts to keep their finances in order that lead members to make poor decisions and spiral into financial difficulties."
Signs that a loan-modification service is actually a scammer include unofficial use of program names or logos of government agencies, non-profit organizations, or lenders; advertising an inordinately high rate of successful loan modifications; and guaranteeing a modification in exchange for an upfront fee.
For all borrowers, free help is always available
through the U.S. Department of Housing and Urban Development, at
MakingHomeAffordable.gov and, for active-duty servicemembers or
veterans, the U.S. Department of Veterans Affairs.
Some lenders also offer services geared to soldiers. For example, Citigroup (C) has joined with three veterans' advocacy groups -- the Iraq and Afghanistan Veterans of America, the Tragedy Assistance Program for Survivors, and the Military Spouse Corporate Career Network -- to launch CredAbility ReConnect, a free online financial education and counseling program designed to help these servicepeople resolve financial difficulties. The program is supported by a grant from Citi Community Development and was developed by CredAbility, a national nonprofit credit counseling organization, in collaboration with the veterans groups.
But perhaps the best defense against getting conned, experts say -- ask questions. Mortgage scammers typically disclose as little information as possible about the services they provide. Borrowers should beware anyone purporting to work for a loan-modification service who resists answering simple questions. If anything feels awry, walk away and seek help elsewhere.
SIGTARP has some other helpful tips for servicemembers to keep in mind when seeking a mortgage modification:
- Don't believe anyone who says they can guarantee or pre-approve your HAMP mortgage modification application -- only your mortgage servicer can grant a loan modification
- Beware of any individual or company charging a fee in advance for loan modification services -- in most cases, this is illegal
- Beware of any individual or company offering money-back guarantees
- Beware of services advising you to stop paying your mortgage payments, pay them directly, or not contact your mortgage servicer
- Paying a third party to assist you with your HAMP application does not improve your likelihood of receiving a modification
- If an individual or company claims to be affiliated with HAMP, check it out by calling the Homeowner's HOPE Hotline
If you're an armed service member or civilian who needs help with your mortgage, go to MakingHomeAffordable.gov or call the Homeowner's HOPE hotline (1-888-995-HOPE) for more information on the HAMP and Home Affordable Refinance Program. And if you feel that you were wrongly foreclosed upon or received a foreclosure notice in error, go to IndependentForeclosureReview.com.