I agree that the frauds need to be stopped.

However the answer is NOT to discredit every for-profit loan mod company. The answer is to regulate the industry. Create licensing and laws that these companies need to follow.

This is a legitimate service if done correctly and with a fair, reasonable fee structure.

Many people simply don't have the time or know how to do this on their own. It's a fact that non-profits are NOT getting the job done, and lenders have not made getting a mod any easier.

I for one paid 1400 to a reputable loan mod company after being denied by my lender then set up on a repayment plan by NACA. They got me submitted for the HAMP plan, my payments came down by 200/mo and my interest rate is now fixed for the life of the loan. If I listened to this advice I would be living in an apartment right now. As far as I'm concerned this is the best money I could have ever spent.

I have taken a great interest in this subject since I began researching my own loan mod. What I have found is that MOST of the criticism and most of the fraud stems from what seems for the most part to be Realtors and Mortgage Brokers.

It's no mystery that these two industries are some of the hardest hit by the downturning economy. Neither are making any money and probably won't be for quite some time. It seems that many of these fraudsters are Realtors or MB's trying desperetely to hold on to the dream they were living in 2005, turning to doing loan mods and eventually ripping people off. It also seems that the people most apt to be on a "crusade" to stop loan mod companies are also Realtors or MB's that are either bitter or jealous because they haven't closed anything all year and legitimate loan mod companies seem to be doing really well.

i agree that it is foolish to pay somebody up front when they have done nothing but go through an income expense report, they obviously have NO idea yet what options may exist, this I do believe is fraud. However, I also don't expect a legitimate business to call my lender once or twice a week for up to 3 months as well as prepare all my financial docs without getting ANY compensation. How do they pay the people fixing the loans? How do they keep their lights, phones, and heat on in the meantime?

In fact I think it's just as foolish for a company to take on a client that has not paid their mortgage in up to 6 months, without that client having any "skin in the game". What happens when the client receives their loan mod agreement in the mail from their lender and then refuses to pay the company that spent many hours and dollars modifying their loan?

The fact is a large number of people in this situation are not the most credit worthy people in the world. How can a legitimate company operate that relies solely on granting credit to these people with NO recourse if they choose not to pay them?

And to answer your questions directly...

"Do you give loan brokers their fees before you sign off your loan documents with the escrow officer?  It is no differnet with these "service providers" they must provide the service first, before they can demand compensation."

A loan mod is NOT a "loan product"....... it's a service. And there are countless legitimate services throughout this world that either charge upfront or charge an upfront retainer. It is supposed to keep everybody honest and also allow the service provider to cover overhead that providing any service always incurs.

Does a contractor agree to build you a new kitchen without first getting a deposit? Does an attorney defend you in court without first getting a retainer?

The answer is NO! And both of these examples compare to a loan mod company much better than a property or loan closing. Realtors and MB's work on COMMISION and that is always how commission is paid, when the deal is sealed, this is a service NOT a commission.

Sure, there are just as many rip offs out there as legitimate mod companies. But this is the lawmakers fault. This industry is not new and the countless hours wasted so far by AG's across the country would have been MUCH better spent in adopting regulation for this industry.

If they don't regulate, they will waste countless more hours bringing lawsuits against the fraud companies and blanket chastizing the entire industry.

Great article! My mom was turned down for a loan modification with her lender and was then scammed out of 4k by a company in Florida. She then hired an A rated company in Glendale, Arizona named Mortgage Assistance Group and finally got a real loan modiification. Their information is below. We as consumers should really start keeping track of the good guys in the industry.

Mortgage Assistance Group

www-mag-az.com

623-486-4505