Even if you aren't a homeowner, you've probably heard about loan modification

 

It's all over the news, the Internet, and even on signs at intersections around your neighborhood. Loan modification has become so lucrative, that many realtors and loan agents are jumping into it to make up for their own struggling businesses.

If you're thinking about doing loan modification, should you hire someone to help? You may think a firm will have more power when negotiating with lenders; however, to make a decision, first you need to know about the two types of firms out there. There are attorney-based loan modification firms, and non-attorney based loan modification firms.

Attorney-Based Loan Modification Firms

• Charge an upfront legal fee (which is similar to the retainer you'd pay an attorney before any services are rendered). The upfront may or may not be placed in escrow, depending on state law.

• Often employee just one lawyer, which is what they use to justify their upfront legal fee.

• The attorney rarely will handle your case. These firms assign most of the work to other employees, called "assistants," or "processors."

You may think the upfront legal fee these firms charge will be worth it, because presumably an attorney would be able to negotiate a better price. In reality, the attorneys do not do much at all - they do not call the banks, nor do they write the letters themselves. Since the attorney rarely will handle your loan modification, it probably isn't worth it to pay the legal premium. In addition, a lawyer calling your bank will not really be more effective than you calling the bank yourself.

Non-Attorney Based Loan Modification Firms

• Generally don't charge an upfront fee.

• Service costs less

• Employees are often overworked

These firms claim their employees used to work in the bank's loss mitigation or loan modification departments. Many of them worked previously as loan or real estate agents. They are doing exactly the same thing as the processors in the attorney based loan modification services - they take your financial data, fill out the paperwork, and call the banks.

But Do You Really Need These Firms?

Unless you absolutely have no time to fill out a few pages of financial data and call the bank every two weeks, you can do a loan modification yourself, with fewer mistakes and with your own best interest in mind. Don't forget, even if you hire a professional service firm, it's still up to you to compile all the documents and financial data anyway.

If you employ a firm, the person performing your modification likely handles hundreds of clients, each with their own 60 page documents. With this much work, don't expect your processor to give you regular status updates. In fact, there's a decent chance they will mix up your file, given the vast amount of paper and clients they deal with.

If you think this is bad, consider your bank's negotiator, who may handle thousands of client files. This combination, between a firm's overworked processor and a bank's negotiator, can mean missing documents, having to fax things over and over again, and inconsistent responses from different people you talk to.

We are not saying that it's not a headache to handle the bank's negotiators your self. However, hiring loan modification services often adds more chaos to an already messy situation. From our experience, those who hire a firm often end up spending a lot of time following up with them, reviewing their correspondences, and correcting their mistakes. Keep in mind that it's only you who will have your own best interest in mind and who knows your own situation the best.

 

About the Author

Cliff is one of the main authors who contributes regularly to the growing real estate resource site RealInvestorTips.com. The site specializes in investment property mortgage loan modification (Chase, Wells Fargo, Citi, Bank of America, American Home Mortgage, and more), short sale for investors and rental management. The site also provides great resources of various owner financing tools like Lease To Own, Purchase Option, Land Contracts, Real Estate Contract, and more.