Why Do Homeowners Pay Up Front Fees to Modify?

If your looking to modify your loan, chances are you know that most companies you talk to are charging you an up front fee to submit a modification application to your lender for you. On average, these fees are about $3,000, sometimes higher and not usually much lower than that fee.

As a homeowner, you pay this fee because the law firm or modification company is assuring you that they can get your modification done for you. The company gives you peace of mind, you feel good about it, and you pay the up front fee because the company makes you feel more comfortable than other ones you talked to or researched online.

However, I will tell you that the majority of our clients paid an up front fee to another modification company only to never hear from them again or at the very least their modification is never done. Its hard to be rational when you could potentially lose your home, but if somebody tells you that they approve you for a modification before you are charged an up front fee, they are not telling you the whole truth.

For example, a typical modification takes about 90 days to be submitted, reviewed and hopefully approved. Let me ask you…How could a company approve you for a modification in 24 hours? They cannot because ultimately your lender decides if you qualify for a loan modification and that decision takes a minimum of 60-90 days. Now you might be a good candidate for a modification based on your personal situation, but you are not officially approved until your lender says so. The reason a company says you are “approved” is because it allows them to justify having you pay thousands of dollars up front.

This is the very reason that we truly  don’t charge up front fees to our clients. This is not self-promotion telling you that you should use our services. It’s just me asking you to be more diligent in your research when you are deciding what company you will be entrusting your home and livelihood to.

To clarify, we charge a fee of $2500 when your modification is approved by your lender. The key is that you know your loan is actually approved for the modification without paying a fee and wondering if anything is going to be done on your file. This fee is not charged until the end when the modification is truly approved by your mortgage lender.

If you pay the full up front fee to a company for your modification, what incentive is left for them to get your modification done? Legal consequences possibly if they don’t do anything but do you have the money to take them to court? Probably not so you want to avoid going down that road…

Basically, the point here is that you must do your research. Give yourself 2-3 days to do your research and then make a decision to commit to getting the modification done. As I’ve mentioned, modifications are not typically done quickly so you want to get the full application submitted to your lender as soon as possible.