The following article entails the viewpoint and opinions of Doug Johnson, who has spent ten years and thousands of dollars researching companies and firms within the debt relief industry.
Mortgage Loan Modification
A Loan Modification is a permanent change in one or more of the terms of a homeowner’s loan that allows the mortgage to be reinstated as current, and results in a payment the homeowner can afford. Successful loan modification also stops the foreclosure process.
There are companies that provide legitimate “loan modification” or “foreclosure prevention services”, but the industry is largely unregulated, making it difficult for homeowners to separate the good from the bad.
It has been my experience that many of the fraudulent “loan modification” companies are owned by mortgage brokers who pocketed large commissions while extending loans to people who could not afford them. They are now charging upfront fees of up to $4,000, but they do nothing to stave off foreclosure, causing homeowners to lose their opportunity to file for bankruptcy protection because of the time wasted.
Please be advised that as of this writing, laws have been passed in 21 states prohibiting loan modification companies from collecting payment until they have completed their services. In Colorado, the attorney general’s office has closed 15 foreclosure prevention companies that charged fees up front.
In 2008, the Federal Trade Commission sued five companies who collectively represented 20,000 customers. Personal lawsuits have been brought against loan modification companies in 29 states.
Avoid loan modification companies that, (1) charge a fee prior to rendering service, (2) cannot provide documentation to verify successful results, or (3) have been in the business of assisting with loan modifications for less than 10 years.
Also, keep in mind, lenders will not even begin negotiations without extensive information relative to expenses vs. income, therefore you should avoid loan modification companies that do not require this information from homeowners.
Please note that legitimate loan modification companies, if unable to procure an affordable modification for a homeowner, are able to assist homeowners with the sale of their home via a short sale or deed-in lieu of foreclosure.
Always check with the Better Business Bureau and Attorney’s General Office’s for complaints prior to contracting with anyone who claims they can negotiate a loan modification for you.
It has been our experience that most loan modification companies just take a homeowner’s financials, submit them to the lender, and hope for the best! Legitimate loan modification companies file homeowner claims directly with the backer (decision maker) i.e., Fannie Mae, Freddie Mac, FHA, VA, RHS, Jennie Mae, guarantors, and PMI’s to assure that all processes and policies (guidelines that govern the loans) are followed. This is important since there are many different types of mortgages, many of which are regulated by the federal government and state agencies, and lenders rarely disclose regulatory rules to homeowners or loan modification personnel.
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