What to Look for in a Loan Modification Company

by tammy on June 1, 2010

With so many home owners having difficulty maintaining their monthly mortgage payments, many people have opted to look into loan modification as a possible solution to their problem. For those that qualify, there is the federal loan modification program under the Making Home Affordable (MHA) initiative, which does not require that the applicant use an external company since they provide free mortgage counseling. For people that are much better off and retain their own legal counsel on a regular basis, they can turn to their attorney for help.

For other people that are doing too well for MHA but not well enough to have their own private attorney there are two options: approaching the creditor directly for loan modification or hiring a loan modification company. There is nothing preventing individuals from approaching their lenders directly and trying to work out an arrangement. However, unless the individual is well experienced with the nuances of mortgage lending and the like, they are not likely to get a very good loan modification and the agreement they do get may ultimately put them in a worse situation. The alternative is to hire a loan modification company which is supposed to be experts at negotiating these types and agreements and will do so on your behalf for a fee.

The problem is that the loan modification industry is not regulated at the federal level, and though many states – especially those worst hit by the subprime mortgage crisis like Florida and California – have implemented regulation, this is not the case everywhere. In fact, there is absolutely nothing preventing anyone from claiming to be a “loan modification expert”, setting up a website and soliciting your business. Therefore, it pays to be vigilant when shopping around for a loan modification company to represent you. Bear in mind that anyone can post anything on a website, so that should be taken with a grain of salt. Further, assuming the loan modification company is a bad one and out to rip you off, plainly they will not think twice about lying to you either, so what they say on the phone is questionable too.

First, find out if your state is one of the ones that have implemented regulation on the loan modification industry. This can be done quickly and easily online. If so, then chances are you have a number of rights spelled out there and the loan modification companies have certain obligations to follow. This obviously makes it much easier to find the legitimate operators. If you do not live in such a state, then perhaps your best bet is to go with a loan modification company that is either operated by attorneys or one that retains a legal firm. You can check into the background of attorneys and they should know what is legal and what is not in your particular jurisdiction. Further, the fact of the matter is that mortgage lenders are much more attentive to attorneys than they are average people or former mortgage brokers. Attorneys represent at least the passive threat of legal action, while everyone else is quite harmless to the average lender.

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