The Washington State Department of Financial Institutions (DFI) advises homeowners who are delinquent on their mortgage to be cautious about using the services of someone offering to help them work with their lender to modify the terms of their home loan.
DFI has received a number of inquiries regarding the legality of providing this service in Washington. While there is nothing inherently illegal about this business, those providing this service in the State of Washington must be licensed as loan originators, mortgage brokers, or consumer loan companies.
Be careful when dealing with companies in other states. If you do business with a company outside Washington, and they do not perform as promised, your only ability to seek damages may be a private lawsuit against them.
Warning Signs of a Possible Loan Modification Scam
- Company operates out of state
- Company is not licensed with DFI
- Company claims license is not required because attorneys are involved
- Out of state attorneys are not licensed to practice in Washington
- Money is required upfront before any paperwork is reviewed or signed
- Company tells you NOT to contact your lender
- Company requires direct access to your bank account or credit card
Tips On How to Protect Yourself from a Loan Modification Scam
- Work With Licensed Individuals and Companies
Make sure you’re dealing with a licensed individual. Companies and individuals must be licensed under Washington’s Mortgage Broker Practices Act, or Consumer Loan Act, before offering to modifying your loan, or taking money from you.
Some companies claim they do not need to be licensed in Washington because they are licensed in another state. This is not true.
Some companies also claim they don’t need a license because there is an attorney involved in the process. That alone is not an exemption from licensing. Attorneys from other states must be licensed to practice law in Washington if they are providing you with legal advice.
- If the Company Is Not Licensed In Washington, Check with their State Regulator
If you do choose to do business with a company from another state, contact the company’s regulatory authority in that state to make sure they are properly licensed, then check with DFI to verify the license status in Washington. Properly regulated companies will be able to tell you how to contact their state regulator to check their license status.
- Verify An Attorney’s License
If you're working with an attorney, verify their license with the Washington State Bar Association.
- Read and Understand All Documents
Be sure to carefully read and understand any documents you are asked to sign. Do not sign anything you do not understand.
- Refuse to Allow Direct Access to Checking Accounts or Credit Card
Protect your money and refuse to allow direct access to your accounts.
- Consider Your Options
You can contact your lender yourself to seek a loan modification.
Contact a HUD approved counselor. HUD approved counselors are available to help you obtain a loan modification. See HUD's list of approved counselors.