What are the common red flags of a permanent modification agreement scam?

1 What is a PMA?

A PMA is a type of loss mitigation option that involves changing the terms of your original mortgage contract. Unlike a loan modification, which is a temporary adjustment of your payment amount or interest rate, a PMA permanently alters your loan balance, interest rate, or term. A PMA can help you avoid foreclosure and make your payments more affordable, but it also requires you to sign a new contract and pay fees and closing costs.

2 How to apply for a PMA?

To apply for a PMA, you need to contact your mortgage servicer or lender and request a loss mitigation package. You'll have to fill out an application, provide financial documents, and submit a hardship letter explaining why you need a PMA. Your servicer or lender will review your eligibility and offer you a PMA if you qualify. You'll have to sign a trial period plan, which is a temporary agreement that requires you to make reduced payments for a few months before the PMA becomes effective.

3 What are the benefits of a PMA?

A PMA can help you save money and keep your home in the long run. Depending on your situation, a PMA can lower your interest rate, extend your term, or reduce your principal. This can result in lower monthly payments, less interest paid over time, or a smaller loan balance. A PMA can also stop the foreclosure process and improve your credit score if you make your payments on time.

4 What are the risks of a PMA?

A PMA is not a free or easy solution. It involves signing a new contract that may have different terms and conditions than your original mortgage. You'll also have to pay fees and closing costs, which can add up to thousands of dollars. A PMA can also affect your tax liability, as some types of PMAs may trigger a taxable event. For example, if your principal is reduced, you may have to pay taxes on the forgiven amount as income.

5 How to spot a PMA scam?

Unfortunately, there are scammers who prey on homeowners in financial hardship. They may offer a PMA that appears too good to be true, but they're actually trying to steal your money or your home. Common red flags of a PMA scam include asking for upfront fees before providing any service, asking you to sign over your title or deed, claiming to be affiliated with the government without providing proof or contact information, telling you to stop communication with your servicer or lender, and making unrealistic promises such as eliminating debt or lowering interest rates. Be aware of these signs and protect yourself from potential scams.

6 How to protect yourself from a PMA scam?

If you're interested in a PMA, it's important to do your research and verify the legitimacy of the offer and the provider in order to protect yourself from a scam. Contact your servicer or lender directly to ask about your loss mitigation options, rather than relying on unsolicited offers from third parties. Check the credentials and reputation of the provider, looking for reviews, complaints, licenses, and accreditations from reputable sources. Read and understand the terms and conditions of the PMA before signing anything, asking questions and seeking legal advice if necessary. Keep copies of all documents and correspondence related to the PMA, monitoring your payments and statements for any suspicious or fraudulent activity that should be reported to your servicer, lender, or law enforcement.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?