Some borrowers, following the guidance provided in last month’s article, "6 tips for a successful loan mod," can handle the modification process entirely by themselves. Other borrowers need help. Unfortunately, as with all disasters, scamsters have emerged to feed on the afflicted by collecting fees for services they promise but don’t deliver.
You are safe from scamsters if you follow my cardinal rule: Select your service provider; don’t allow a service provider to select you. This article is about the options from which you can make a selection.
Representation by for-profit companies
Borrowers who are overwhelmed by the process may want someone to "take over" for them, staying with it until a conclusion. Representation, as distinguished from counseling, is expensive. Fees vary but most are in the $2,500 to $4,000 range. This segment of the market is also where the scamsters hang their hats.
There are some good players in this business who know the ropes and work hard to earn their fees. The problem is that it is very difficult to tell the good ones from the bad ones.
Law firms and those affiliated with law firms are governed by state ethics and licensing rules, which may limit abuses, but you should not depend on that.
If you go this way, look for referrals from other borrowers who have been there, research any recommended companies online, and check your state attorney general’s office for any complaints that may have been filed against the firm you are considering.
Counseling by nonprofit counselors
At the opposite pole in terms of the services you should expect are the free nonprofit counselors who will assist borrowers with loan modifications, as well as with other problems. A list of HUD-approved counselors is available at www.hud.gov/offices/hsg/sfh/hcc/fc/.
The quality of counselors varies widely and some will not prepare your loan modification package for you. In particular, the counseling agencies that answer the Homeowners HOPE Hotline (1-888-995-HOPE) — which is where Treasury refers visitors to its Making Home Affordable website — do not typically prepare loan modification packages required by the servicers.
They will explain the process and provide an "action plan" but leave you to implement the plan. If you want a counselor who will do more, establish that before going ahead.
There are two new sources of help now available that I recommend. They are for-profit firms, but I have no financial interest in either. The help they provide is short of representation but goes well beyond what is offered by nonprofit counselors.
This relatively new site helps borrowers develop a package of required documents for delivery to servicers. The borrower fills out a questionnaire covering all the information servicers require in making a modification decision. Based on the questionnaire, MyCaal provides all the documents the borrower must complete for submission to the servicer.
The borrower also receives immediate feedback on the likelihood that the modification request will be granted, which is useful, even though it is only an educated guess. MyCaal charges $98 for its services, which includes personal coaching for those who need it.
A borrower can use the portal free of charge to develop the package of documents required by the servicer, to transmit the package electronically to the servicer, and to communicate with the servicer until such time as a final determination has been made on the borrower’s request for a modification.
Borrowers who need assistance in completing the forms and compiling the required documents can purchase it for $150. This service is provided through an affiliated nonprofit company DMM Counseling Inc.
As between MyCaal and DMM, I would go with DMM if my servicer was connected to them because the portal provides a superior way to communicate with your servicer.
The servicers now connected to DMM are: 21st Mortgage Corp., America’s Servicing Co., Bank of America (but only if you are in an active bankruptcy), JP Morgan Chase/EMC, Ocwen Loan Servicing LLC/Litton Loan Servicing, Resurgent Capital Services, Saxon, Select Portfolio Servicing, Washington Mutual, and Wells Fargo Home Mortgage.
If your servicer is connected and you go with DMM, spend the $150 to have an expert check your submission. It will save everybody’s time and hasten a decision.
If your servicer is not connected to DMM, the selection is more of a tossup. DMM charges a little more for expert services, but it has been around much longer than MyCaal. Whichever one you use, please drop me a line and let me know how it went.
Thanks to Igor Roitburg.
The writer is professor of finance emeritus at the Wharton School of the University of Pennsylvania. Comments and questions can be left at www.mtgprofessor.com.
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