Mortgage modifications have been around for years, but recent relief efforts have raised the profile of the workouts as an alternative to foreclosures, short sales, auctions, and bankruptcy.

With greater attention from government and private relief efforts and with increased demand from struggling homeowners seeking relief, a boom in loan modification services has come from a host of sources including real estate agents, mortgage brokers, attorneys, government agencies, lenders, and other professionals.

A home loan modification, granted only upon the existing lender's approval, permanently reworks some of the terms of an existing mortgage in order to make the loan more affordable to the homeowner.

A mortgage modification is not a refinanced mortgage, which is a brand new loan written to pay off the old home loan.

Because of the sudden proliferation of mortgage modification services, it's tough to know how to navigate the mortgage modification maze. The workouts are typically voluntary on the part of the lender, they are completed on a case-by-case basis and, as such, they frequently come without standardized procedures.

Consumer advocates say there are three basic approaches to a mortgage modification.

The HUD-approved counseling method

Consumer advocates widely advise homeowners to contact the lender at the first sign of mortgage trouble, and that remains true. However, when it comes to specifically seeking a loan modification, they further advise getting to a U.S. Department of Housing and Urban Development (HUD) non-profit counseling agency before approaching a lender about a modification.

HUD-approved counseling agencies are generally hardwired to lenders and are in sync with a given lender's underwriting standards. They know what documents lenders will want to see to determine the viability of a loan modification. They can also help you prepare your loan modification appeal so it reveals you are in financial trouble and can't afford the current mortgage, but can afford the terms of a modified loan that fits.

"We have direct links to lenders, can save them hours on the phone with the lender, and protect borrower information from unscrupulous people. And nonprofits receiving money from Congress must provide the work free. Others generally charge a fee," said Marcia Griffin, president of the non-profit HUD-approved HomeFree-USA.

The private loan modification route

Because both nonprofits and lenders have been inundated with calls for aid, it may be prudent to hire a private loan modification service to get a foot in the lender's door. Consider the following useful tips if you hire a private loan modifier.

• Shop around. A growing number of real estate professionals are offering loan services. Comparison shop for the best deal and the most competent service. Get referrals to private or for-profit loan modification services from family members, friends, co-workers, professionals and others you trust.

• Make sure your loan modification service provider has a clean record. Consider legal and real estate professionals offering loan modification services only if they have current, unblemished licenses. Also check their record with the Better Business Bureau and their respective trade or professional group.

• Avoid paying advance fees. Get performance-related service whenever possible. Never pay an advance fee if your lender has already recorded a notice of default. You could be throwing good money after bad. It's illegal in California for "foreclosure consultants" or any real estate licensee to collect a fee after a notice of default has been recorded.

• Check your state for similar or other loan modification regulations. Make sure to familiarize yourself with any other rules governing private loan modification services and state rules specific to lenders granting modifications. You won't know if the modification service is adhering to the law if you don't know the law.

• Carefully examine any contract or terms of service before proceeding. If you don't understand the terms or aren't satisfied with what's promised, don't sign. Get help. That could mean reconsidering waiting for a HUD-certified counselor.

"Work with a local company that isn't outsourcing work that you'll never see to Florida, Los Angeles, Texas or Mexico," says Robert Aldana, a San Jose real estate agent who is also president of San Jose-based Home Resolution & Credit Services Inc.

Do it yourself

A do-it-yourself loan modification is not for most homeowners. Attempt it only if you have a sufficient mortgage or consumer financing background, if you understand that only the lender can give final approval, and if you exercise great caution in choosing the educational materials.

"Can you do it yourself? Sure you can. You can also sell your own home, fix your own roof or replace the engine in your car. But should you?" asks Aldana.

If you choose to go the do-it-yourself route, the following resources may help.

• The FDIC offers for free its IndyMac program "FDIC Loan Modification Program Guide — 'Mod in a Box'." The program information specifically targets lenders, but contains a homeowner sample agreement, instructions, frequently asked consumer questions and other useful materials.

• The PMI Group, Inc. recently launched an the free Mortgage Options Assessment Tool on its HomeSafePMI web site. According to PMI, the tool "enables homeowners to organize, calculate, and produce reports on their current financial situations prior to meeting their lenders or counselors to discuss solutions to foreclosure."

• Otherwise, a plethora of good, bad and ugly do-it-yourself loan modification kits, manuals, guides and courses have cropped up, often with Internet marketing. They represent an unregulated, untested and unstandardized compendium of loan modification information and advice.

Some of it is free for the asking, some requires payment for books, manuals, software and other materials. Many services request your personal information. Whenever any offer requires you to provide personal or private information, be aware of the offer's privacy policy and any terms of service.

Pay particular attention to what the service will or won't do with your information, especially when it comes to sharing it with third parties. When information is shared with affiliates and third parties it's also crucial to learn those affiliates' privacy policies and terms of service.

• No matter which loan modification route you take, beware of fraud.

Published: February 12, 2009

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Broderick Perkins parlayed a career in old-school journalism into a contemporary digital news service that really hits home. The award-winning consumer journalist, originally from Wilmington, DE, is founder, publisher and executive editor of the bootstrap DeadlineNews Group, a Silicon Valley-based editorial content and consulting service specializing in residential real estate, consumer news and related editorial consulting services. The DeadlineNews Group includes the website, DeadlineNews.com, offering real estate editorial content and consulting services, and its back shop, the Deadline Newsroom, an open house on news that really hits home. Perkins obtained his formal journalism education from University of Delaware and a journalism boot camp, the Institute of Journalism Education at the University of California-Berkeley. He went on to 20 years of service as a daily newspaper journalist at the Wilmington, DE News Journal and San Jose, CA Mercury News. Perkins covered housing on the San Jose Mercury News reporting team which earned a General News Reporting Pulitzer Prize in 1989 for coverage of the Loma Prieta earthquake. He has also produced real estate, consumer and small business content for the Wall Street Journal, Los Angeles Times, RealtyTimes.com, Nolo.com, Better Homes and Gardens, the National Association of Realtors, Homestore/Move and Intuit/Quicken among more than three dozen publications. In addition to managing the DeadlineNews Group, Perkins most recently served as chief editorial consultant for Nolo's Essential Guide To Buying Your First Home, Nolo, and writes real estate television scripts for RealtyTimes.com.