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' attention.

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 modification process.

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 loan modifications-- attorney-based and non-attorney-based.

Two types of Loan Modification Companies

   Attorney-Based:  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.

   Non-Attorney-Based:  These are 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.

Advantages 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 contacts 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.  

Disadvantages 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 them.
NOTE:   Doing your own loan modification 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.

Criteria for 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, they 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 California, loan 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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