First, let’s start with what a modification is. The term ‘modification’ means to change the terms of your existing loan contract. There are many different programs that your mortgage company may offer. The main basic programs are HAMP or the Making Home Affordable program (better known as the Obama Program).
The terms and conditions of this program are set forth by the government. Your mortgage company has to adhere to the timeline set forth by the government for this program. In essence, they simply process the modification.
So, if all of the elements needed to get you approved for this program aren’t met within the allotted amount of time given then, the modification won’t be approved. Another thing to consider is that if you pay your taxes and insurance separately, this program requires you to escrow them into your monthly payment thereby making your monthly payment higher. If you don’t qualify the first time through, it is very unlikely you can apply for it again as there are so many mortgagees trying to get approved.
Then there is a classic modification that most mortgage companies offer on their own. The terms are similar to the government program but most stipulate that the balanced owed will be placed at the back end of the loan. The loan will then be modified to encompass that fact.
Once that happens, there is a good chance the amount you were paying before the loan was modified will be higher in the terms of the new loan to reflect that. You will need to check with your specific mortgage company about other programs available as they very from state to state. Most mortgage companies tell you not to hire an outside firm and that they can modify you without cost. This is true but there are some exceptions and I’ll explain them here.
The Pros and Cons of Hiring an Outside Firm
So now that you know what a modification is, let’s take two examples of when hiring a lawyer or a firm to represent you might be considered.
- Example 1 – A couple living in California fell for a 1% loan offer.
A 1% loan is a loan where the mortgager pays only 1% of the interest on what's owed and nothing towards the principle and as time goes on, negative amortization takes over and before you know it , you owe more than the house is worth. Your payment will increase ( because you are only paying 1%)along with the fear of losing your home. After getting the run around and exhausting all of your mortgage company's modification programs, you decided to hire a lawyer at the tune of $3,500 in a last ditch effort to save your home.
In this example the company they hired ordered a forensic audit of their loan and discovered several violations on their original loan documents. The couple’s mortgage company was forced to renegotiate or modify the terms of their loan. So in this particular instance, it was worth it to the homeowners to hire an outside firm
- Example 2 – Take the same couple with the same dilemma except they hired a company that simply took their money and gave empty promises.
They end up losing their home and their $3,500. The question still remains, is it worth it to hire an outside firm? The answer is…do your homework! Sad to say but a great majority of modification companies out there are fraudulent. It’s a good idea to Google the company you are considering and thoroughly read the reviews.
It is not enough to simply run the companies name through the Better Business Bureau.
Be careful, sometimes the company itself will put out positive reviews in order to throw you off their fraudulent scent. Just take the time to read, read, and read! Also, if you can find someone online who has some experience in dealing with the company that you are considering, it would be even better. Lastly, if you didn’t do the proper research and you find yourself in a losing situation, there is very little recourse or options left. Sure, you can sue but in all likelihood you won’t get your money back.
You can report them to the Better Business Bureau (www.bbb.org) or you can file a complaint with the attorney generals office by visiting them at http://ag,ca.gov/complaint_form or call 800-952-5225.
Torrie Johnson - I have been married for 13 years and am a mother of three. I have a background in the health field and have complex medical transcription ...
