While the daily headlines announce the latest corporate and Wall Street bailouts, homeowners are wondering whether anything is being done to bail out Main Street. The good news is that many distressed homeowners are writing their own bailout programs via loan modifications. For qualifying homeowners, lenders can (and often must) modify the mortgage loan to accomplish the following:

• Lower and fix the interest rate

• Extend the term

• Decrease the principal due

• Roll any delinquent payments into the principal

• Forgive any late-payment penalties and fees

• Re-amortize the loan to make the monthly payments more affordable

As a real estate professional operating in the midst of the biggest foreclosure epidemic of our generation, you are likely to have plenty of clients facing the looming threat of losing their homes to foreclosure. A loan modification can help your clients save their homes and earn you their loyalty. The next time they need to buy or sell a home, they are going to remember the person who helped save them from foreclosure.

Unfortunately, many homeowners are often as cavalier in choosing a loan modification company as they were when they took out the mortgage loan that landed them in their current predicament, so you need to encourage them to think before they act and proceed cautiously when choosing a loan modification company.

Advise with Empathy

When offering advice to homeowners who are facing the threat of losing their home, remain very sensitive to their situation. Many homeowners are in this predicament through no fault of their own, and even if they are partially or wholly to blame, that matters very little at this point. They need solutions, not further embarrassment.

Finding Reputable Loan Modification Companies

Your clients may find dozens of loan modification companies on the Internet or through advertisements, but the best way to find reputable professionals is through referrals. If you know other clients who have worked through a loan modification service, ask for the company’s name and contact information and how satisfied your clients were with the services they received. Keep a list, so you can provide future clients with referrals. (You may even be able to earn some compensation by referring clients to reputable companies.)

Identifying companies with the right stuff

When your clients begin their quest, advise them to search for companies that meet or exceed the following criteria:

• Phone number and street address – not just a Web site, P.O. Box number, and toll-free phone number

• Solid industry reputation and transparency

• BBB (Better Business Bureau) member in good standing or a member of other consumer-friendly organization

• Real testimonials of prior success in negotiating loan modifications

• Professional designations – licensed, insured, member of reputable industry associations

• Professional affiliations – team members with distinctions and education such as lawyers, real estate professionals, and so on

• Track record for promoting industry regulation and oversight

• Companies that offer educational resources, an honest Web presence, and clear, detailed explanations of the problems and solutions

• Favorable refund policies or no up front fees. Up front fees are common and not a red flag if you’re dealing with attorneys or a law firm.

Spotting red flags

Caution your clients to be on the lookout for the following warning signs:

• Pure salesmanship, no substance, just a shell game

• Compliance or regulatory complaints filed with and verified by reputable organizations, such as the Better Business Bureau or a state regulatory agency, not simply a disgruntled consumer posting a rip-off report on the Internet

• Inability of representatives to answer questions

• Lack of straight answers

• Undercapitalized start-up companies simply trying to cash in on a crisis

• Companies that encourage you to act on emotion or fear rather than make informed decisions

• Companies with cheap or shoddy looking Web presence – if you see a page with Google ads, run the other way

• Companies that can’t, don’t, or refuse to explain the process and services they perform

• A one-size-fits-all approach – they should ask you plenty of questions before offering a solution

• Companies that pirate reputable company’s resources and copyrighted materials

• Companies that guarantee results or make wild claims – offering a money-back guarantee is acceptable, but nobody can guarantee success

• Large up-front fees with an unclear or no refund policy

Tip: If a company reviews the case and says it cannot help your client, do not judge them harshly – they may be the only trustworthy company of the bunch. Some companies promise the moon to get the business knowing full well they cannot deliver.

Encourage your clients to trust their instincts. The company must pass the “smell test” – that is, if your client smells something funny, he or she should dismiss the company. Clients need to feel comfortable and confident in the company before jumping in. Remind your clients to take their time:

• Don’t get pressured into signing up for anything immediately.

• Have your attorney review any documents or contracts before signing them.

• Ask questions until you fully understand anything you find confusing or out of the ordinary.

• Ask the same question in different ways and on multiple occasions – the answer shouldn’t change unless your situation has.

Communication Is Key

The prospect of losing one’s home is very scary. In addition, if the lender took advantage of the homeowner, he or she may be suspicious of others in the industry. This can compromise the representative’s ability to function effectively. Encourage your client to be as cooperative as possible with his or her representative and to keep the lines of communication open. Your clients need to know that loan modification takes time – their representative may be hard at work, but the lender could be dragging its feet.

The best approach is for your clients to remain patient. Calling every day or becoming upset when they have not heard back from their loan modification representative for several days or even a week is counterproductive. On the other hand, they should not be afraid to call their representative about pressing issues, especially if they haven’t heard from him or her in a few weeks.

Rewarding Good Companies with Referrals and Testimonials

Follow up with your clients to find out which loan modification company they used, what the company was able to do for them, and how satisfied they are with the service they received. If they had a great experience, encourage them to tell others about it.

You can do your part, too. Let your other clients know about reputable loan modification companies who deliver quality service – whenever you have dealt with someone who is reputable, did what they said they would, and achieved results, you should let the world know that this is a good company.

Published: February 2, 2009

Use of this article without permission is a violation of federal copyright laws.

Ralph R. Roberts, CRS, GRI is an award-winning and internationally recognized real estate agent, author, coach, and speaker. Throughout his career, Ralph has proven his commitment to helping other real estate and sales professionals build upon their past and present success, grow and expand their businesses, and provide a rich and rewarding future for themselves, their customers, their employees, and their families. As president and CEO of Ralph Roberts Realty, Ralph has personally helped thousands of consumers realize their dream of homeownership. While selling over 10,000 homes (and buying and selling over 3,000 investment properties) throughout his 30-year career, Ralph has made the time to mentor and coach hundreds of professionals in real estate, sales, and a host of other fields. Ralph is a recognized authority on Real Estate and Mortgage Fraud; Residential Real Estate; Personal Salesmanship; Sales Force and Office Management, Motivation, Design, and Team Building; and Foreclosure Self-Defense and Loan Modification, fields in which he has demonstrated his commitment to preserving the American Dream of Homeownership. Ralph's numerous websites, blogs, seminars, and speaking engagements engage, entertain, and educate both consumers and professionals. Ralph is also an accomplished author with several successful titles to his credit, including: Power Teams: The Complete Guide to Building and Managing a Winning Real Estate Agent Team Financing Real Estate Investments For Dummies (John Wiley & Sons) Mortgage Myths: 77 Secrets That Will Save You Thousands on Home Financing (John Wiley & Sons) Foreclosure Self-Defense For Dummies (John Wiley & Sons) Protect Yourself from Real Estate and Mortgage Fraud: Preserving the American Dream of Homeownership (Kaplan) Foreclosure Investing For Dummies (John Wiley & Sons) Foreclosure Myths: 77 Secrets to Saving Thousands on Distressed Properties (John Wiley & Sons) Advanced Selling For Dummies (John Wiley & Sons) Flipping Houses For Dummies 52 Weeks of Sales Success (John Wiley & Sons) Walk Like a Giant, Sell Like a Madman (John Wiley & Sons) Cross-Cultural Selling For Dummies (John Wiley & Sons) To learn more about Ralph, visit AboutRalph.com, check out his daily insights on real estate and mortgage fraud prevention at FlippingFrenzy.com, or visit his latest blog dedicated to helping distressed homeowners fight foreclosure, KeepMyHouse.com. You can reach Ralph at or by calling (586) 751-0000.