Mortgages: Beware of Fake Fixers

When times are tough, scam artists know just how to exploit a desperate situation. That's especially true when it comes to the housing industry, which has been decimated by a record number of foreclosures and defaults in the past year.

One of the rip-offs that has emerged in this mess: fraudulent loan modification companies. Preying on troubled homeowners' fears, these companies promise to negotiate lower interest rates and/or principals on loans so consumers can afford their monthly payments and stay in their homes.

Though there are no official estimates on how many phony loan modification companies are out there, housing advocates say they are on the rise.

How to Spot a Scam:

Guarantees. Watch out for any company that makes promises. There's no way for a loan modification company to know whether it can successfully negotiate a better interest rate or other terms on a homeowner's loan — especially before the company even sees the loan documents or speaks with the lender.

Copycat names. Be on the lookout for organizations that sound remarkably like legitimate nonprofits. As soon as the Hope Now Alliance was up and running, scam artists started creating similar-sounding Web sites like Hope Now USA and Opportunity for Hope Now. Be particularly cautious of names with "hope," "FHA," "USA" or "America" in them.

Upfront fees. Avoid any company that requires an upfront fee for its services. It's not only considered unethical, it's also illegal in some states.

Homeowners who can't seem to make any progress with their lenders on their own should call the Hope Now Alliance (1-888-995-HOPE) or a housing counselor approved by the Department of Housing and Urban Development. Their trained staffs have access to dedicated phone and fax lines that allow them to work more efficiently with the banks. Best of all, their services are free and are available to homeowners of all income levels.