Step 4 – Working with Loan Modification Companies

Step 4 – Working With a loan modification company – What you must know before talking with them

Loan modification companies provide an attractive alternative to attempting a do it yourself loan modification. If you are late or have missed a mortgage payment they may already be calling with promises and offers that make it sound like they are the answer to your prayers.

Loan modification negotiation as a business model presents a conundrum for both the loan modification company and the defaulting borrower. On one hand the time and effort required to complete a loan modification requires some compensation to cover the hard costs at a minimum. On the other hand it is not in their power to grant the loan modification so they cannot guarantee they will get results.

The loan modification industry has also spawned an enormous number of scams and schemes designed to take advantage of unsuspecting homeowners who are facing the prospect of losing their homes. They are easy targets for slick presentations and exaggerated claims .

Loan modification cHere’s What You Need to Know About Loan Modification Companies
ompanies must be licensed in the State of Washington as Loan Originators. Here is a convenient lookup resource for you to check them out.
Verify A License With DFI Before working with a company or individual providing loan modification services in Washington, verify that they are licensed.
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Many Loan Modification companies will respond to the licensing question with “we are attorney and don’t have to be licensed with the Department of Financial Institutions”. If they are attorneys they have to be attorneys licensed in the State of Washington. Here is the lookup for them.
Washington State Attorney Lookup
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The Department of Financial Institutions issued a scam alert for loan modification companies. In it there are several red flags for you to look out for;
Company operates out of state
Company is not licensed with DFI
Company claims license is not required because attorneys are involved
Out of state attorneys are not licensed to practice in Washington
Money is required upfront before any paperwork is reviewed or signed
Company tells you NOT to contact your lender
Company requires direct access to your bank account or credit card

Tips On How To Protect Yourself From A Loan Modification Scam

Work With Licensed Individuals & Companies

Make sure you’re dealing with a licensed individual. Companies and individuals must be licensed under Washington’s Mortgage Broker Practices Act, or Consumer Loan Act, before offering to modifying your loan, or taking money from you.

Some companies claim they do not need to be licensed in Washington because they are licensed in another state. This is not true. Some companies also claim they don’t need a license because there is an attorney involved in the process. That alone is not an exemption from licensing. Attorneys from other states must be licensed to practice law in Washington if they are providing you with legal advice.

If The Company Is Not Licensed In Washington, Check With Their State Regulator
If you do choose to do business with a company from another state, contact the company’s regulatory authority in that state to make sure they are properly licensed, then check with DFI to verify the license status in Washington. Properly regulated companies will be able to tell you how to contact their state regulator to check their license status.
Read & Understand All Documents
Be sure to carefully read and understand any documents you are asked to sign. Do not sign anything you do not understand.
Refuse To Allow Direct Access To Checking Accounts Or Credit Card

Protect your money and refuse to allow direct access to your accounts.

DFI Fee Agreement
The Department of Financial Institutions has created a fee agreement for use with loan modification companies. Any legitimate loan modification company will be familiar with this agreement and agree to use it for their service. Presenting this agreement is a good first step to determining if the loan modification company you are working with is legitimate or not.

DFI Loan Modification Fee Agreement Download
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DFI Interpretive Statement Regarding Loan Modification Companies
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When reviewing your loan modification companies documentation be sure that the fee paid is for a loan modification that is acceptable to you. Simply getting an extension on the trustees sale date or a loan modification on unacceptable terms should not be enough to earn their fee. Banks routinely make loan modification offer that actually increase the monthly payment to the borrower. They also routinely extend trustees sale dates. Each of these actions can be interpreted as a modification to your loan terms and trigger payment to the company without resulting in an acceptable loan modification for you. It makes no sense to be obligated to several thousands of dollars in fees for a loan modification that is essentially worthless to you as a homeowner.

One Response to “Step 4 – Working with Loan Modification Companies”

1. High Risk Checks says:

   March 19, 2012 at 12:57 pm

   Check Drafts…

   I saw this really dandy post today….