Many people that we talk to every day are in a situation where “loan modification” is the best possible option for them. They have little or no equity in their home, they are in an adjustable rate mortgage and they have had a reduction in income. As a result of one, two or three of these things, they are not able to meet the current underwriting guidelines to refinance their home.
So rather than lose their home to foreclosure, they are looking for alternatives.
One possible solution is to work with your current lender to modify your existing loan. Another possible solution is to find a HUD-approved Housing Counseling Agency. Another is to work with a well-respected loan modification company who charges money for their services.
Apparently, there are some “loan modification scams” that are going on and you should be aware of what these look like.
A great post by a well-respected mortgage professional was posted recently here — and while it has become a conversation for mortgage professionals more than consumers — the point is this:
As a consumer, you have options to try to get your loan modified for free without paying a large amount of money to a loan modification company.
From the post, my favorite paragraph was one that someone asked the author to bold:
Consumers reading this blog:
Loan modifications are performed by a lender with no fee to the homeowner. HUD-approved Housing Counseling Agencies perform loss mitigation/loan modification services for free. These agencies are supported by our tax dollars.
As we have mentioned before, we currently recommend people to one loan modification company and do not get involved other than just referring them and allowing them to decide on their own whether or not working with a loan modification company is right for them.
I can say that with the number of people who contact us that are in a tough sitaution and looking for help, it is clear to me that the more help you can get on your side, the higher your chances of a successful outcome.
Many people who call us have already tried to get their lender to modify their loan and have been unsuccessful. Very few people have talked to a HUD-approved Housing Counseling Agency, so maybe that is a next-best step before deciding to go with a loan modification company to help them.
But one thing is clear: the absolute worst thing that someone can do who is in danger of losing their home is nothing.