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Is Hiring a Loan Modification Company a Good Idea?

As most people are aware, the country is currently going through an economic crisis which has resulted in many homeowners finding themselves in dire straits. The sad fact is that many homeowners simply have no idea what they should do if they suddenly discover they are not able to make their monthly mortgage payments. It is only natural to fear foreclosure in this type of situation. Loan modification programs have become more widely known thanks to coverage in the media, yet few homeowners know how to take advantage of this type of help.

One element that has led to the confusion of many homeowners who have considered applying for a loan modification is the number of companies who offer assistance with loan modification for a fee. There are now numerous loan modification companies advertising loan modification services online. Even more confusing is the fact that many of these companies market their services with a money-back guarantee or as a non-profit service in order to make their services as attractive as possible to homeowners. Testimonials from homeowners who are supposed to have received an amazingly low fixed interest rate or a significant principal loan reduction are also often used in the marketing process. Such testimonials can certainly appear to be attractive, but they also send up a red flag.

It should be kept in mind that any company that advertises a service which appears too good to be true, probably is! Over just the last few years alone, such loan modification companies have managed to take thousands of dollars in fees from desperate homeowners who are terrified of the prospect of foreclosure. In some instances, the owners of such companies have been jailed or fined for their unscrupulous business practices. In fact, these firms have been banned from charging upfront fees for loan modification services in many states, including California.

Before you consider retaining a loan modification service company, you should be aware that today there are numerous scams in operation and that you do not need a company to negotiate a loan modification on your behalf. You are perfectly capable of doing this on your own. In reality, such loan modification companies can do nothing for you that you would not be able to accomplish on your own.

If you have found yourself in a situation where you are struggling to meet your monthly mortgage payments, the first step you should take is to contact your lender immediately and inquire about a loan modification. The requirements for approving a loan modification do vary from lender to lender, but it is still important to go ahead and take the first step of inquiring before you actually become delinquent on your mortgage payments.

You should also be prepared to send in the proper documentation when you apply for a loan modification program, including past paystubs, bank statements and income tax returns. In addition, the bank may also require a letter from you stating why you are no longer able to meet your mortgage payments; which is known as a hardship letter. The bank will then review your financial situation in order to determine whether you qualify for a loan modification. Keep in mind that it is imperative that you do not hold back any information during this process, including high credit card bills or additional loans you may have. The bank will pull a copy of your credit report and they will find out about all of your debts anyway, so it is important to be open and honest in the beginning.

The hardship letter is going to be one of the most important elements in being approved for a loan modification. The letter should detail all of the events that have resulted in you now being unable to afford your mortgage. The letter should be kept short as well as straight to the point. Remember, most banks are processing thousands of such requests and they do not have time to review a multiple page letter. Stick to the facts, whether it is that you have been laid off from your job, your adjustable rate mortgage has been reset, you have had medical problems; whatever the case may be. Restrict it to no more than two pages. Explain how a loan modification will help you as well as lender.

Most banks today do not want to go through the hassle and expense of a foreclosure if they can avoid it, so if you can present solid reasons why a loan modification would benefit both parties, the bank may very well approve it. You can find loan modification specialists that could help you modify your loan here.



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