Loan Modification Companies
There are a tremendous amount
of loan modification companies that have cropped up since the housing
crisis went into full tilt -- all vying for distressed homeowners'
Many are legitimate, but unfortunately, there are also quite a few bad
apples who only care about collecting fees and not doing the work,
leaving homeowners in worse shape than when they first started the loan
Your job is to find the legitimate loan modification companies and see
if they would be a great fit for you and your situation prior to
selecting who you will trust to do the job.
There are generally two types of companies who process and negotiate
attorney-based and non-attorney-based.
Two types of Loan
These are either law firms, or they are companies who use processors to
assemble the loan modification packages, mortgage professionals to
review them, and either have an in-house attorney or an outside
attorney do the legal analysis prior to sending the loan modification
package to your lender.
The contract you sign will be with the law firm used by the loan
modification company as they are the only ones permitted by law to
collect upfront fees for the processing of your loan modification
request. Please note that California's new SB94 law now
prohibits even attorneys from collecting upfront fees. Please
keep reading below for the link to a "no upfront fee" alternative.
companies who are licensed by their state's respective Department of
Real Estate in order to engage in the business of loan modifications.
These companies may have to pass a certain exam to qualify for a
license to do loan modifiations and have the ability to collect upfront
fees. Just like their attorney-based counterparts, these
companies are no longer able to collect upfront
fees in California since the passing of SB94 in October 2009.
of Hiring a Loan Modification Company
- Legitimate loan modification companies have the knowledge
and expertise in guiding you with the required paperwork in the
required format, saving you time and energy, making sure your paperwork
is assembled and submitted properly.
- Hiring a loan modification company to do the negotiations
for you will, to some extent, keep you from the stressful and
intimidating tactics that lenders employ to get the upper hand in the
negotiation process. This is especially helpful if you do not
possess a strong stomach to keep collectors at bay.
- If, and that's a big IF, you find an extremely good
negotiator within a legitimate loan mod company, who completely
understands your situation and will fight for you, then it's like
having your own advocate who will champion your rights and is
therefore an extremely valuable asset.
- The fee you pay is worth it if your loan modification
company is successful in securing an approval for your request from
your lender. The new terms and lower interest rate will save
you tens of thousands if not hundreds of thousands (depending on your
particular situation) within the next one to five years.
- Hopefully, they have employees who process,
analyze, and negotiate hundreds of loan modifications on a monthly
basis. This should give them the experience, expertise and
within most if not all of the lenders and mortgage servicers and their
loss mitigation departments, to give your loan modification a better
chance of being approved.
of Hiring a Loan Modification Company
- Some people do not have the money for the upfront
fees. BUT...not to worry... There are some reputable loan
modification companies who charge NO Upfront Fee Loan Modifications.
- Obviously the main disadvantage is hiring a loan
modification company who does not have the experience and expertise to
negotiate an approval from your bank for your request, so please be
careful with your selection. See below the criteria to look
for during your selection process.
- As much as we would all like to think that a third party
would have our best interest at heart, keep in mind that no one would
probably work as hard as you would to drive your own loan
modification. Most of thesecompanies are
handling many loan modification files and are inundated with a
tremendous amount of work
and follow-up, so you may not get as much personal attention as you
would like, which can become nerve-racking if you are within the
waiting period. Just be warned that most complaints about
loan modification companies is not enough follow up. You may
have to take the reigns and follow-up with them for progress reports as
often as it makes you comfortable. Better yet, establish a
reasonable follow-up schedule (2-3 times a week, every Friday, etc) with
your representative when setting expectations at the time you hire
Doing your own loan
without the aid of an experienced third party is really not all that
complicated. You can certainly do it on your own if you
choose to do so. Here's a Do
It Yourself Loan Modification Kit
that some loan modification professionals have used to train,
if this is the route you'd like to pursue instead.
But if you would like an experienced advocate who knows all the
ins and outs of loan modification and are trained to get you approved,
then we highly recommend going with one ot the best loan modification companies and one who does not charge upfront fees until you are approved by your lender.
Selecting your Loan Modification Company
Whatever type of loan modification company you choose to
hire, there are certain criteria to look for in selecting the best one.
- Ask for their track record or success rate. For
some reason, a lot of loan modification companies have a roundabout way
of answering this question without giving out hard numbers, but insist
on it. If they won't give it to you, ask for references.
- Ask how long they've been in business and how many loan
modifications do they process per month. And more
importantly, of those, how many do they get approved? This
will tell you their success rate.
- How well do they know the Obama Plan's HAMP guidelines?
- Ask how many employees they have on staff and beyond that,
how many are processors, negotiators, administrative support, and how
many are attorneys? If you know their monthly volume, you can
easily calculate the ratio of their staff with their clients.
The lower the ratio, the better, so there's more attention given to
your file (hopefully).
- Do some background check and see their rating with the
Better Business Bureau, State Bar (for Attorneys), any of the consumer
watchdog sites online.
- Ask your friends and family who have had successful loan
modifications and find out which loan modification company they
hired. Ask them what they liked and disliked about the
company and see if they would recommend them for you.
- Fees are also a factor in your decision. Loan
modification fees range from anywhere from $1500 - $7000.
Make sure you compare apples to apples when interviewing
different loan modification companies and the services they promise to
provide. Some include modification on 2nd mortgages and some
charge additional for them.
- If you can find a loan
modification company who
charges no upfront fees,
are definitely worth a closer consideration because they are highly
motivated to get your loan modification approved, otherwise they don't
get paid -- vs. a company who is paid upfront and have less incentive
to work as hard (not to say that this is true in every case because
there are always exceptions). As mentioned before, in
modification companies are NOT allowed to charge upfront fees so make
sure the loan modification companies you are considering are in full
compliance of this law.
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