Can You and Should You Handle Your Own Loan Modification?

Scammers! They are out there and they're looking for you! It is truly amazing how quickly new companies are created (and how many!) when people are in need of help.

You are probably on of the millions of homeowners that may be able get help from their existing mortgage lender through a process called loan modification. Loan modifications come in many sizes and shapes but the ultimate goal of any modification is to prevent losing your house through foreclosure.

Modifications are accomplished through any number of changes to your existing loan terms. Possibly you may be forgiven a past due balances or parts thereof, maybe a reduction in your mortgage balance, a lowering of your required monthly payment - usually through a reduction in your interest rate and in some cases, obtaining a fixed rate if it is currently variable (adjustable).

Well, why wouldn't EVERYONE go for a loan modification then? Because lenders aren't stupid. (Wait... did I really just say that? Actually, most of them ARE stupid, but not THAT stupid)

See, in order for a loan modification to take place, you need to either be in default of your mortgage or getting close to that point. If you are current on your payments, you'll most likely not get approved for a modification (but I'm not saying it's impossible - I've seen it happen on more than one occasion) And if you have a variable rate, getting your lender to modify to a fixed is definitely a strong possibility.

Because there are so many documents needed to obtain a modification, thousands of new companies have sprung up to offer loan modification services. Quite frankly, having some guidance when pursuing a loan modification can be quite beneficial. The problem is that most of the companies offering loan modification services are doing no more than you can do yourself.

Before I continue, I think I should tell you a little about myself. Since 2002, I have been running a mortgage shopping service called Mortgage123.com. In 2006, I wrote a popular report called "The Sub Prime Trap" which I also turned into a Squidoo lens - The Sub-Prime Trap.

I wrote it because I saw far too many people being swindled into accepting mortgages that were great for lenders, but very bad for homeowners. My report revealed how thousands of mortgage brokers offered sub prime mortgages when they should have been offering FHA loans.

Why did they do that?

Well, because the FHA makes it fairly difficult for mortgage brokers to offer FHA loans. Sub Prime lenders smelled opportunity. If they made it easy for mortgage brokers (who handled approximately 60% of all mortgages in the country) to do business with them they reasoned, then they could drastically increase the amount of mortgages they sold. And you know what? They were right.

Mortgage brokers needed to only fax over an application and a credit report and they would receive a mortgage approval the very same day. To offer FHA mortgages, a mortgage broker needs to go through a lengthy approval process, have a substantial quality control plan in place, meet certain net worth requirements, have a true office to work from, along with a number of other requirements.

The strategy worked. Millions of Sub Prime loans were sold by mortgage brokers that were too lazy or simply were not motivated enough to go through the FHA approval process.

Guess what, friends?

It's now happening all over again!

This time, it's the loan modification business. Companies are springing up everywhere. Most of them know no more about mortgage modifications than they learned from reading a few "How to" reports that are floating around on the internet! Just do a quick search for "loan modifications" and you can find thousands of companies. Hardly any of them were even in existence just 1 year ago. What does that tell you?

Now, it is true... most lenders today will offer you a modification... IF you know how to present your case and ONLY if you happen to qualify for one.

Requesting a modification of your loan must be done correctly. But don't get fooled by companies that offer to obtain a modification with a large upfront payment. I've heard of instances of companies charging up to $5,000 UP FRONT. That's not only unethical- it may even be against the law depending on the state you reside in.

If you feel you are capable of compiling all the information needed by a lender and you feel comfortable in a negotiation, then you may be able to handle the modification yourself. And I will gladly send you a list of documents that are needed. You will not get everything you need by calling your lender. They will simply ask you to write a hardship letter and provide proof of income. But that is not sufficient to adequately make your case. If you would like the entire list of documents that you should provide, visit my site at AskRonBorg.com; I'll be glad to send you the list.

But my strong recommendation is to get attorney representation. And I mean a law firm. Be especially aware of companies that say they have "attorneys on staff". I mean, do you think your lender will be more responsive to a letter that says "From the Law Firm of..." or "ABC Loan Modification Company"?

So if you happen to be 2 or 3 months behind on your mortgage, or if you already have a Notice of Deficiency or "Lis Pendens" filed against you and you don't want to or can't sell right now, this is what you do. Contact me at AskRonBorg.com. Let me know that you need some assistance with a loan modification and I will send you a package that will tell you exactly what to do to get a loan modification from your lender along with a list of required documentation.

If, after reading through my report you would like to have an attorney represent you, I know of an excellent firm that has had tremendous success with cases nationwide. You only pay a retainer fee of $500 upfront; you owe nothing if they do not get you an acceptable modification. Also, while they cannot guarantee it, in many of their cases, they were able to get the lender to pay their fee!

So please be careful. If you're not sure of who you are dealing with, reach out to me and I will help. In return, I hope to make you a life long client for my mortgage services. Because some day, this mortgage mess will just be a distant memory!

Good Luck.