It’s easy to make you a victim and rip you off with a loan modification. People are willing to believe the wild claims companies make about being able to cut your loan balance or slice your interest rate. It sounds so good when the salespeople are pitching you.
If you received a postcard or letter in the mail claiming you are eligible to have your mortgage modified, don’t forget this is an advertising piece to try to sell you services.
Typically when you respond the commissioned salesperson will tell you they can help you and you qualify for their services. I’ve yet to meet someone that has been told they don’t qualify.
The salesperson may even try to sell you some report for a fee that will show you 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 generating sales organizations that get paid to sign people up and sell them the services the company is pitching.
Just because you are being sold something does not mean it is best for you.
Free Loan Modification Services
It is important to remember that no lender is required to modify any loan for any reason. Knowing that, before you pay one penny for loan modification services, you should contact a free HUD Housing Counselor and your mortgage company to review if you even qualify for a loan modification program that applies to you.
A HUD Housing Counselor is a subsidized government nonprofit counselor that can offer you independent advice about loan modification programs you may qualify for, for free.
I’ve not run into a fee charging mortgage modification law firm or company that bothers to tell people that.
They also don’t tell people that 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 and many are reporting loans being modified in two months or so.
You can click here to find a local bankruptcy attorney and talk to them for free about your specific situation. Get the facts and then you can make an informed and educated decision if bankruptcy is right for you.
Typically these loan modification law firms operate for a while and then close up and disappear with the money consumers have 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, to get around the law.
If the loan modification company says you will be represented by an attorney check to see if that attorney is licensed as an attorney in your state. Check the website of your state bar association.
Also, if you are being sold services that cost thousands of dollars, I would advise you to seek the advice of a local real estate attorney that is licensed in your state before you pay a dime.
Take a close look at the contract the company is asking you to sign. What you will find is they say in the fine print there are no refunds nor guarantees.
If you would like for me to review the client agreement the company is asking you to sign, you can upload it to me here.
I would recommend that anyone considering using such a company should read the following fee 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
Here is What the California Attorney General Warned
The Get Out of Debt Guy Mortgage Loan Modification Resources
Be sure to first read How Not to Get Scammed by a Mortgage Loan Modification Company.
First you’ll need to determine your current debt-to-income ratio. The target debt-to-income ratio under the Home Affordable Modification program is 31%. Use this free online DTI calculator.
Mortgage Modification Calculator
The mortgage modification eligibility calculator will ask you several questions and then show you which programs you may be eligible for.
Free Mortgage Modification Help and Counseling
If you have questions about the process or eligibility you can call 888-995-4673 and get connected with an mortgage modification adviser for free. This help is provided by government subsidized HUD Housing Counselors and they can be a big help in navigating the modification process.
In order to assist you, the housing expert will need to gather some information from you. 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 pay 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 due on all of 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.
- It may also be helpful to have: A letter describing any circumstances that caused your income to be reduced or expenses to be increased (job loss, divorce, illness, etc.), if applicable.
You can also get free help and housing counseling from a local HUD approved counselor. You can find your local free housing counselor, here.
Contact Your Mortgage Company
Not sure if your mortgage company offers modification programs? Not all do. You can contact your mortgage company to ask them about mortgage modification programs you might be eligible for. Click here to find your mortgage company.
Want to know the net present value (NPV) of your home for the mortgage modification process? No problem, use the free NPV calculator to find out. The NPV calculator is right here.
The calculator can be used by homeowners who have been denied a HAMP modification because of their NPV result or can also be used by homeowners prior to applying for a HAMP modification to help them better understand the NPV evaluation.
No Advance Fees
The Federal Trade Commission has a Mortgage Assistance Relief Services Rule which prohibits advance fees for mortgage rescue services or mortgage modification help.
If you have already been scammed by a loan modification company, report it here.