Mortgage Loan Modification Companies -- Saviors or Scam Artists?

In a recent CNBC website posting, Diana Olick says the following about mortgage loan modification companies "[They] have sprung up like crabgrass in the midst of the foreclosure crisis, many of them run by former subprime mortgage brokers or real estate brokers who don’t have much work these days."

These companies charge an upfront fee to help cash-strapped borrowers navigate the red-tape of lender / servicer loan modification program, to get a payment that they can afford. Some companies are legitimate, while others are scams.

How can you tell the difference? You need to exercise due dilligence.

First, find out who is running the company. State Real Estate Commissions in California, Colorado, and a host of other states allow only those companies run by licensed mortgage brokers or attorneys to charge in advance for their services. You can find out both your states regulations, and whether a provider is permitted perform loan modification services by contacting your real estate commission.

Also, find out if the person with whom you are working is a licensed mortgage broker, or attorney. You can do this by contacting the mortgage broker licensing authority in your state for mortgage brokers, and your state supreme court for attorneys.

See if there is any State or Federal actions pending against a company. In California alone, there are over 250 active investigations of mortgage loan modification companies and several have already been shut down.

Before signing any contract, make sure that all of the fees, charges and services to be provided are clearly spelled out. If you don't fully understand the contract, don't sign it.