Loan Modification--Beware

The mortgage crisis has spawned a new niche industry--loan modification. Loan modification can be defined as a lender agreeing to "modify" the interest rate on an existing mortgage to help the borrower avoid foreclosure. It is in the Lender's best interests to help the borrower avoid foreclosure, because the Lender is never able to recapture the balance of the mortgage when they foreclose on a property.

There are a number of individuals and companies that advertise as loan modification specialists. For a fee, they will negotiate with your lender on your behalf to obtain a modification to your interest rate to help you avoid foreclosure. There are a number of very talented, honest and effective people working in this niche industry, but unfortunately, there is also a large group of unscrupulous, untrained and incompetent people and companies in the industry.

Here is what to watch out for if you are communicating with a loan modification rep:
If they tell you that you need to be behind in your mortgage payments for them to obtain your modification, terminate the conversation and do not use them. This is a dangerous misconception when it comes to loan modification. You do not have to be behind on your mortgage payment to get a modification from your lender. If your lender is convinced that your current mortgage payment is a financial hardship and that you will not be able to sustain it in the future, they will grant a modification in most cases and you will not have to ruin your credit by missing mortgage payments.

By Personal Financial Guide