A loan modification is a restructuring of your mortgage in which you and your lender agree to modify the terms of your home loan. When you request a loan modification, your lender may defer some of your payments, change your interest rate, or extend the length of the loan. A modification also may involve reducing the amount of money you owe on your home by forgiving or canceling a portion of the mortgage debt. Many homeowners seek modifications to avoid foreclosure or to obtain more affordable monthly mortgage payments.
Resources and Assistance to Help You Keep Your Home
You may apply for mortgage assistance on your own or with free help from a HUD-approved housing counseling agency. A housing counselor can assess your situation and help you prepare for discussions with your lender or loan servicer. To find a HUD-approved housing counseling agency near you, access HUD's database for Foreclosure Avoidance Counseling or call 888-995-HOPETM (4673).
The California Housing Finance Agency (CalHFA) sponsors special programs for homeowners facing foreclosure that may help you retain your home or provide funds to relocate to new housing. Visit CalHFA's Hardship Assistance Page to view options available to you.
Homeowners who have fallen behind on mortgage payments due to COVID-19-related financial hardship may be eligible for relief through CalHFA’s California Mortgage Relief Program. This program will pay a total of $1 billion to cover missed mortgage payments during the COVID-19 pandemic. This is a one-time grant that eligible homeowners will not have to repay. To find out if you are eligible and to apply, visit the California Mortgage Relief Program web page.
For more information about mortgage relief and foreclosure alternatives, go to the Housing Is Key web page.
Loan Modification and Foreclosure Rescue Scams
Beware of loan modification and foreclosure rescue scams. Mortgage rescue scammers falsely claim that they can obtain a loan modification or other relief to avoid foreclosure. Some may pretend to be affiliated with a government agency or a housing assistance program. Others falsely claim to provide legal representation, “predatory lending investigations” or “forensic loan audits” of your mortgage paperwork. These companies may claim that by using their services, they can pressure your lender and negotiate a “good deal.” Unfortunately, these operations often fail to obtain the relief they promise, and some companies take payments upfront and make little or no effort to help consumers.
No person or company—including attorneys, foreclosure consultants and real estate agents can demand advance payment for providing loan modification services in California. (Cal. Civ. Code, §§ 2944.7 and 2945.4; Cal. Bus. & Prof. Code, § 10085.6, subd. (a).) This means that a company or individual cannot obtain payment from you until after they perform all the services promised in your contract or agreement. In addition, mortgage foreclosure consultants who offer to stop foreclosure or assist you with obtaining a modification or other relief are required to register with the Attorney General and post a $100,000 bond. (Cal. Civ. Code, § 2945.45.) Search for the name of a foreclosure consultant to find if they are registered at Is Your Foreclosure Consultant Registered?
Tips to Avoid Foreclosure Rescue Scams
- Know who you’re dealing with. Some scammers pretend to be working with your lender, mortgage servicer, or the government in order to get money or personal information from you. For example, they may misrepresent that they are working with the California Mortgage Relief Program, which is a government program to help homeowners cover mortgage payments missed during the COVID-19 pandemic. If someone reaches out to you offering services or asking for payment, make sure they really are who they say they are before you make any payments, give out any information, or sign any documents. If you have any doubt, contact the agency or company directly by looking up their information online.
- Don't pay up-front fees for loan modification services. Foreclosure consultants and other companies offering loan modification services are prohibited by law from collecting money before services are performed. Avoid any company that demands an up-front fee prior to providing services.
- Don't transfer title or sell your house to a "foreclosure rescuer." Beware that this is a scam to convince homeowners they can stay in their home as renters and buy their home back later. It might also be part of a fraudulent bankruptcy filing scam. Either way, once a scammer has the title to your home, they can evict you and keep the home for themselves.
- Don't pay your mortgage payments to anyone other than your lender or loan servicer. Mortgage consultants should not advise you to redirect mortgages payments to their company, as they often keep the money for themselves. Never trust anyone else to make your mortgage payments for you.
- Never sign documents without reading them first. Many homeowners think they are signing documents for a loan modification or new loan to pay off the mortgage that they are behind on. Later, they discover that the paperwork they signed transferred the ownership of their home to someone who is now trying to evict them. Help yourself avoid this situation by taking your time to read through all documents before signing anything.
- Be suspicious of any guarantees made to stop the foreclosure process — no matter what your circumstances are. Only your mortgage lender or servicer has the discretion to stop foreclosure and grant a loan modification. No third party can guarantee or pre-approve your mortgage modification application.
- Avoid dealing with “attorney-backed” businesses or law offices that refuse to provide an attorney’s name or State Bar number. If an attorney-backed business or law office declines to provide essential information regarding the attorneys that work for them, they are likely hiding something. To protect yourself from shady actors, work only with attorneys that you are able to verify using the State Bar of California’s Attorney Search.
- Avoid companies offering “forensic loan audits” or “predatory lending investigations.” Predatory lending investigations and forensic loan audits analyze your mortgage loan file to determine your original lender’s compliance with state and federal mortgage lending laws. Scammers will oftentimes make false claims regarding these services, such as claiming that the audit is 100 percent free when it is not, or that it will provide you with the leverage you need to stay in your home – even if it is not true.
- Work with licensed/registered companies. You should always verify the license of anyone who is servicing or negotiating the terms of your mortgage loan. Mortgage lenders and servicers must be licensed by the Department of Financial Protection and Innovation. You can verify whether a company is licensed by using the Department of Financial Protection and Innovation’s financial services and mortgage lending licensees search tool. Most mortgage foreclosure consultants who offer to stop foreclosure or help you get a loan modification or other mortgage relief must register with the Attorney General. You can verify whether a foreclosure consultant is registered by using the California Department of Justice's Is Your Foreclosure Consultant Registered? database.
Where Do I Report Fraud or File a Complaint?
If you paid a company or mortgage consultant to stop foreclosure or help negotiate with your lender, but they did not do what they promised or you felt you were mislead or defrauded, you may file a complaint with the following agencies:
File a complaint with the California Attorney General's Office.
File a complaint with the Federal Trade Commission.
If your complaint is against a real estate broker or salesperson, visit the California Department of Real Estate for details, or call the DRE Public Information Line at (877) 373-4542.
If your complaint is against a mortgage loan broker, visit the California Department of Financial Protection and Innovation (DFPI) for information about mortgage-related issues and how to file a complaint.
If your complaint is against an attorney, visit the State Bar of California website.
If you suspect criminal activity such as fraud, theft or embezzlement, you should also notify the consumer protection division of your local district attorney’s office.
You may also wish to consider filing a Small Claims Court action. These are informal courts where disputes are resolved quickly and inexpensively by a judge. You can recover up to $10,000 in Small Claims Court. You represent yourself and can request a judgment for monetary damages. Visit the California Courts Self-Help Center for further information.
Frequently Asked Questions
I am behind on my mortgage payments or fear I may be in the future. What should I do?
If you are having trouble paying your mortgage or have received a foreclosure notice, contact your lender or loan servicer immediately. You may be able to negotiate a new repayment schedule. Also check out Resources and Assistance to Help You Keep Your Home.
When I contact my lender or loan servicer, what options are available?
If you have fallen behind on your payments, consider discussing some of the following foreclosure prevention options with your lender or loan servicer:
- Reinstatement: You pay the loan servicer the entire past-due amount, plus any late fees or penalties, by a date you both agree to. This option may be appropriate if your problem is paying your mortgage is temporary.
- Repayment plan: Your servicer gives you a fixed amount of time to repay the amount you are behind by adding a portion of what is past due to your regular payment. This option may be appropriate if you've missed a small number of payments.
- Forbearance: Your mortgage payments are reduced or suspended for a period you and your servicer agree to. At the end of that time, you resume making your regular payments as well as a lump sum payment or additional partial payments for a number of months to bring the loan current. Forbearance may be an option if your income is reduced temporarily (for example, you are on disability leave from a job, and you expect to go back to your full time position shortly). Forbearance isn't going to help you if you're in a home you can't afford.
- Loan modification: You and your loan servicer agree to permanently change one or more of the terms of the mortgage contract to make your payments more manageable for you. Modifications may include reducing the interest rate, extending the term of the loan, or adding missed payments to the loan balance. A modification also may involve reducing the amount of money you owe on your primary residence by forgiving or canceling a portion of the mortgage debt.
I need immediate legal assistance. Who can help me?
You should consult with a private attorney. Visit the State Bar website for assistance in locating an attorney. If you can’t afford a private lawyer, you may be eligible for free or low-cost legal services. To find a legal aid organization near you visit LawHelpCA.org. Members of the Armed Forces and their families can also get help from their local JAG legal assistance office. You can locate your nearest JAG legal assistance office by going to the U.S. Armed Forces legal Services Locator.
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