It’s easy to become a victim of an unscrupulous mortgage modification company. Many people fall for wild claims about decreasing interest rates and loan balances. It sounds so good.
But if you receive a postcard or letter claiming you’re eligible to have your mortgage modified, remember it’s nothing but an ad.
Respond, and you’ll likely find yourself talking to a commissioned salesperson who will tell you you’re eligible for their services: I’ve yet to meet a consumer who’s not. They may even try to sell you a report showing the problems with your mortgage.
Don’t waste your money.
These companies often pretend to be law groups or law firms, but most are actually not owned by attorneys at all. They are lead-generation organizations that get paid to sign people up and sell them services.
Free loan modification services
It’s important to know that no lender is required to modify any loan for any reason. So before paying for loan modification services, contact a free HUD Housing Counselor and your mortgage company to see if you qualify for a loan modification program.
A HUD Housing Counselor is a free, government-subsidized, nonprofit counselor who will offer independent advice about loan modification programs you may qualify for.
I’ve also yet to encounter a fee-charging mortgage modification law firm or company that bothers to tell people they could get free help.
They also don’t tell people the fastest way to get a mortgage modified might just be with a Chapter 13 bankruptcy filing. The timelines on the lender response are very tight in a bankruptcy, which means some loans can be modified in as little as two months.
Many loan modification law firms operate for a while, then close up and disappear with the money they’ve been paid. (See what people are saying about Estate Law Group as an example.) There have also been a number of attorneys that have been disbarred over mass joinder services where the firms charge a fee to sue your lender in a large group.
The FTC says don’t pay an advance fee
The Federal Trade Commission says consumers should not pay an advance fee for mortgage modification assistance. They passed the Mortgage Assistance Relief Services Rule (MARS Rule) that says consumers cannot be charged in advance for these services. That’s why many “law firms” popped up: They get around the law by saying they’re collecting for legal advice, not mortgage modification.
If a loan modification company says you’ll be represented by an attorney, check your state bar’s website to see if the attorney is licensed in your state.
If you’re being sold services costing thousands of dollars, first seek the advice of a local real estate attorney.
Take a close look at the contract the company is asking you to sign: You’ll likely find there are no guarantees and no refunds.
If you would like me to review a client agreement some company wants you to sign, upload it to me here.
Before considering any mortgage modification company, read the following free guides.
- The Ultimate Consumer Guide to Checking Out a Debt Relief Company Before You Sign On the Line
- How to Check Out a Business or Company to Avoid Getting Scammed or Ripped Off
Mortgage loan modification resources
Mortgage modification calculator: The mortgage modification eligibility calculator will ask several questions, then show you which programs you may be eligible for.
Debt-to-income calculator: The target debt-to-income ratio under the Home Affordable Modification program is 31 percent. To find yours, use this free online DTI calculator.
Net present value calculator: Want to know the net present value (NPV) of your home for the mortgage modification process? Use this free NPV calculator. The calculator can be used by homeowners who have been denied a HAMP modification because of their NPV, or can be used prior to applying for a HAMP modification to help you understand the NPV evaluation.
Free mortgage modification help and counseling: If you have questions about the process or eligibility, call 888-995-4673 and get connected to a free mortgage modification adviser. This help is provided by government-subsidized HUD Housing Counselors and they can be a big help.
Before you call, have the following documents handy:
- Information about your first mortgage, such as your monthly mortgage statement.
- Information about any second mortgage or home equity line of credit on the house.
- Information about the monthly gross (before tax) income of all household members contributing to the mortgage, including recent pay stubs if you receive them or documentation of income you receive from other sources.
- Information about your savings and other assets.
- Account balances and minimum monthly payments for your credit cards.
- Account balances and monthly payments on all your other debts such as student loans and car loans.
- Your most recent income tax return.
- If applicable, it may also be helpful to have a letter describing circumstances negatively affecting your income or expenses: job loss, divorce, illness, etc.
If you’d rather talk to a local HUD counselor, either by phone or in person, you can find one here.
Contact your mortgage company: Not all mortgage companies offer modification programs. Contact yours and see if they have a program you might be eligible for. Click here to find mortgage servicers.
So there’s a quick snapshot of what’s available to help you start the mortgage modification process without parting with a penny.
If you have already been scammed by a loan modification company, report it here.
If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you free.