Loan modification companies claim they can get you better terms on your mortgage if you fall behind in your mortgage payments. However, these services are not necessary. You can go through the government or directly to your lender instead.
What Loan Modification Companies Do-Or Claim to Do
A legitimate loan modification company can negotiate with your mortgage lender on your behalf if you believe you are eligible for better mortgage terms. The company may get better terms, but the decision is not up to them. Only lenders can make changes to mortgages. Even if the company is legitimate and obtains better terms from the lender, they will charge you. If you are already behind on your mortgage, this is money you do not have. If you are not behind on your mortgage, this is money you are wasting.
Unless you have serious trouble dealing with paperwork or are worried a lender might take advantage of your situation, try talking to your lender on your own first. Contact your lender, or go to the government's Web site, Making Home Affordable. On the site, you can take a brief quiz to find out if you are eligible for loan modification. You can also get information about your lender and find out what documentation you need when you request loan modification.
If you learn you are not eligible or if you have further questions, you can make an appointment with hud.gov's Foreclosure Avoidance Counseling. And it's all free. If you have reasons for going to a loan modification company, it should still be your last resort.
If You Are Still Interested In Using a Loan Modification Company
First, find out how long the company has been in business. A loan modification company that opened up recently is likely more interested in making a fast buck from the housing crisis. A legit loan modification company will also never ask you to pay fees up front.
If the company's representatives start making promises or claim ties to the government, then you should go elsewhere. Always remember that the final decision is up to mortgage companies, and the loan modification company is only a middleman. And, if a loan modification company asks you to transfer your deed, run, don't walk. The Federal Trade Commission is already going after questionable companies, but it is still your responsibility to do research and ask questions.
Even if you find a reliable company and feel that it is your only option, you may not be able to modify your loan. Going from your lender to the government to a loan modification company will not change your financial situation overnight, and you may need to consider other approaches to your problem.
If you think your mortgage payments are too high and worry about making them, it's important to know your options. Both refinancing and loan modification can improve the terms of your mortgage, but they have some important differences.
Mortgage loan modification might help you out of a tough situation, but the rest of your finances must be stable in order for a loan modification to be successful.