Can You Trust a Loan Modification Company?

by tammy on April 3, 2010

Since the beginning of the collapse of the American residential real estate market in 2008 and the subsequent recession, loan modification has become a popular idea for people that have found themselves paying more for their homes than they can reasonably afford. However, as mortgage loans are complex matters, many people have looked for assistance for getting loan modification, so it can come as no surprise that an entirely new market has developed of individuals and companies offering loan modification assistance.

Although loan modification has always been possible and there have always been a few companies that have specialized in this field, the new industry is utterly dominated by newcomers. Further, the loan modification industry is wholly unregulated at the federal level, though some states have implemented their own regulations to rein in some of these services. As an unregulated industry, anyone can claim to offer loan modification services regardless of whether or not they have any experience or actual expertise to offer. Further, there are a number of free services available that can help people seeking loan modification and at least some of the loan modification companies out there are simply reselling the free services. Therefore, a degree of prudence and due diligence is called for when seeking out a loan modification company.

As a general rule, no one should consider a loan modification company if they are applying for loan modification under the government-sponsored Making Home Affordable (MHA) program. As repeatedly highlighted on the MHA website (www.makinghomeaffordable.gov), loan modification assistance for this program is freely offered by counselors approved by the Department of Housing and Urban Development (HUD) in all fifty states. In fact HUD has a dedicated page – www.hud.gov/offices/hsg/sfh/hcc/fc/ – to help people find these free services in their area. There is nothing that a loan modification company can do to help someone with a MHA loan modification that cannot be received for absolutely nothing through HUD.

If, on the other hand, the borrower is seeking direct voluntary loan modification outside of the government MHA program, then a loan modification company may make a lot of sense. Quite simply, real loan modification experts can make a huge difference in how smoothly the process runs and whether or not an effective modification can be agreed upon. However, the consumer should be wary and be sure to investigate the company before dealing with them. The first thing that consumers should be alert for are loan modification companies that demand payment upfront before any services are actually rendered or demand regular monthly payments, because these companies have a vested interest in dragging out the process as long as possible and actually doing as little as possible.

Although they usually cost more, the best loan modification companies are those that are either composed of attorneys or those that regularly retain attorneys for loan modification negotiations. Generally speaking, the companies that use attorney act in compliance with the law and are taken much more seriously by lenders and loan servicers since there is an automatic implied threat of legal action. Loan modification services operated by people with no real experience or expertise are not usually taken near as seriously as those that use professional legal representation.

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