Loan Modification.  It is a popular term nowadays, spoken all in hushed whispers and furrowed brows.  No doubt you have even received the a few junk letters here and there from companies you have never heard of, claiming to be the ones to save you from your pending variable rate adjustment.  So what is a loan modification, anyway?  And, who qualifies, and who should you go to if you decide a loan mod would be in your best interest?!

A loan modification is where a representative company, for a nominal fee of $1500-$3500 (cheaper than a refinance), creates a need-based bargaining position with your current financial scenario and takes these qualifying figures to your current lender and asks that the terms of your current loan be modified so you can afford your payment and stay in your home.  Most often the terms that are modified are:  changing from a variable/adjustable rate mortgage to a 30 year fixed and dropping the interest rate, and sometimes significantly to lower your payment.  Sometimes the modification can reduce the principle balance, but that is more an exception than a rule.

Now, as you would guess, not all “representative companies” are created equal.  Here are some things that you as the consumer should look for in a company.

1. 100% money back guarantee if they cannot get your loan modified.  Period.
2. Lawyers. Yes, I said it.  It would be best if the company had staffed lawyers that talk to the lenders.  They know the legal contractual jargon, when the lenders are bluffing, and how far they can push it.
3. A practice of using current neighborhood comparables to determine an accurate value of your home.  If you are upside down in your house (and many are), it might be beneficial for those lawyers to also see if they can modify the principle balance, as well.
4. A company with a proven track record for closing those modifications.  There are a lot of people out there who say they can do it, but only a few are actually getting it done.
5. Someone who qualifies you BEFORE they take your money.  There is actually a complex formula that is used to determine if you qualify and all that work should be done before you ever give anyone a dime.

Loan modifications are worth it when you are working with a good company.  Personally, I aligned with Choice Loan Consulting about 6 months ago, and now I  help others get loan modifications through them.  I do all of the qualifying personally to make sure there are no surprises and have found Choice to be both professional and thorough in their processes.  They have a proven record for excellence – I know because I am doing one on my own home now.  There are a few other companies out there as well that can help you get the job done.  Just remember what to look for before handing over money.

Roshan Richards