How Do You Know the Loan Modification Company is NOT a Scam?

We’ve all heard horror stories about homeowners who have paid thousands of dollars up front to a loan modification company that not only could not modify their loan but could never be reached again. Basically, the loan modification company took the money and ran.  Unfortunately it has been a common occurrence as homeowners are desperate to do anything to save their home.

Fortunately, there are things you can do as a homeowner to protect yourself. Below are signs that the company is Not running a scam:

- First, the company does not ask for any money up front. You do not want to pay someone until they confirm that your lender has agreed to modify your loan. Note that the modification process is taking a minimum of 90 days with most lenders so if they say you are approved within the first 30 days of the process then you should be skeptical. I don’t know any modification company besides The Loan Modification Foundation that does not charge up front. In discussing with another law firm last week, they confirmed the same that The Loan Modification Foundation is the only company they heard of that truly does not charge upfront fees. I think you will find this to be the case when you call other modification companies.

- The company does not make any guarantees as to the modification you will receive. The company should acknowledge that they have no idea what rate or payment you will receive until they submit your modification application to your lender. Since your mortgage lender is the only one who will agree to a modification, you want to make sure the company does not make any promises or guarantees to you just because they want your business.

- The company does not promise a principal reduction on your loan. This is also a common scam right now. Real estate values are going down and homeowners are frustrated with having to pay on a loan when their home no longer has any equity. Banks and mortgage lenders are not reducing the principal balance on first liens right now. Lenders are more open to principal reductions if you have a 2nd loan on a property but there is no benefit to a lender to reduce the principal balance on your 1st loan so they are not doing it. A company may try to get your business by trying to make you feel better about getting a principal reduction on your first mortgage but lenders are not reducing principal reductions on first loans. I know everyone is all about principal reductions because their values have gone down but there is no benefit to a lender to reduce the principal balance on your first loan. Why? It is because if the lender ends up taking your home in foreclosure or agreeing to a sale at any point in the future, the lender would end up getting less money because they agreed to reduce your principal. I will do a blog post on this in the future because I’m going off on a tangent.

Back to the original reason for this post… A company is not scamming you if they don’t charge you upfront fees and they don’t make promises they absolutely cannot keep. Of course, the only company I know that truly does not charge upfront fees is www.loanmodificationfoundation.com. It’s not a shameless plug, it’s the truth. If you are aware of any other companies that do not charge upfront fees, I would be happy to research them and if confirmed they don’t charge upfront fees, we will post them here. We are trying to do everything we can to assist homeowners to make the most educated decision when it comes to modifying their home.