Back in 2004 I worked in a busy mortgage banking office that was overwhelmed by the volume of business coming in due to the extremely low interest rates available and the boom in real estate sales. We had a backlog of refinance files pushing closings out past the 90 day mark. Many of the files were simple no cash out refi's for borrowers who just wanted to take advantage of the low rates. When the funding delays reached critical mass we started losing the business of some very good customers. Lucky for us our primary investor Fannie Mae took action and implemented the Mortgage Modification to streamline the refi process for those who just wanted to save some money.
Things were more simple then and our modifications required far less work and decisions than modifications to avoid foreclosure. Borrowers seeking rate and term refinances were given a choice of a full refi with customary fees at closing or a modification for a flat fee of about $400. Full refi closed in approx. 60-90 days, modification in 15-30 days. Everything was done in-house and we offered the service to eligible borrowers as they contacted us to inquire about refinancing. There were no middle men, no negotiations, and no reason for arbitrary denials. A lot has changed since the boom days and none more than mortgage modifications.
Simplicity is an elusive concept lately, however I will keep this as simple as possible. If you apply for a modification of your mortgage loan, always deal directly with your lender or mortgage loan servicer. That's it, follow that one rule and you will avoid Mortgage Modification fraud. There is of course more you need to know to be successful. The lure of modification companies is their claim they will properly create, package, and negotiate a successful modification proposal with your lender completely taking the task out of your hands. If you are going direct you must create a proposal yourself based on guidelines for the governments "Home Affordable Modification Program (HAMP)" to have a reasonable chance of success. The HAMP guidelines are currently available at efanniemae.com as well as several other places on the web, some are more concise and readable than others.
Why not just call your lender and get an application for a loan mod going over the phone? Mortgage loan servicers are swamped with requests for modifications and they are not set up to handle the processing, or the work load. They would prefer not to process modifications. Sending in a complete proposal has a number of advantages for example; calculations are completed and known by you, most of the work is done eliminating the common excuses used by servicers to give borrowers the run around, and you will have a copy of the complete proposal and all supporting documents in case your servicer conveniently "loses" your package. Once you begin the process you should keep a call log of your communication, date and time, to whom you spoke with, and what was said. Be persistent and make scheduled follow up calls.
It would be great if you could trust that you were getting an honest and professional effort from a company or individual advertising a modification service. The simple fact of the matter is you can't. That doesn't mean you can't get a favorable deal on a modification. It does mean you will have to do some work. There are resources available to help you with preparation and organization.