Paramount Equity mortgage loan modification hustle -- a good idea?

[Anonymous]

Over the last 9 years I have rebuilt my credit score (with a few glitches along the way) out of a bankruptcy to around 720.

I'm in a very tight financial situation -- my income has dropped substantially because a substantial number of our firm's clients are financially distressed and can neither pay their current bills nor hire us for additional work. So far, I'm hanging on month to month, but just barely.

I have two loans against my residence, taken out in Feb. 2007: the underlying note  (Countrywide) and a second (Nat'l City), both fixed-rate 30/yr.   I am current on both, with no late payments on either.  I have one 30-day past-due on a prior note from August 2004. 

My home value has decreased to where I am about 10% upside down (not counting costs of sale). 

I'd like to hang onto the house if I can.  Even if I have to sell, the deficiency would be a substantial score hit.

Paramount Equity arranged my most recent loan package.  They have recently called me to propose that I use a collaborating law firm to try to negotiate a loan modification with Countrywide  to reduce the monthly payments.  No guarantees, and the legal fees are $3500.  The Paramount salesperson will "evaluate" my situation and give an estimate of what the modification amount would be.  I have already given some fairly detailed information and was told that I would "probably" qualify for a modification in the $400 - $750/mo range.  

Paramount loans the $ for the atty fees.  That's the motivation, and I am very uncomfortable with the idea that there are no guarantees.

Assuming (ONLY for this hypothetical) that I would get a modification, what else do I need be aware of?  I have identified the following unanswered concerns:

1. Would a modification, by itself, without any late history, affect my FICO score?

2. Can Paramount Equity be trusted?  That is, is this a legit program or a loan scam in a down market?

Anybody else out there have experience with this?

Thanks bunches.

[Anonymous]

3500 is ridiculous.  Also, you would have to have a huge balance to get the payments down more than $1-200 per month unless you are at high interest rates currently.  Last, anything they can do, you can do by calling your mortgage company and speaking to their loss prevention (or whatever they call that department).  You do not need to pau someone to do it.

It may reflect on your score depending upon what you agree to.  If it is just a short term modification or a interest rate drop then you are probably OK, if you are looking for a principle adjustment then I am not sure, but that could show up as a settled amount and settlements do adversely afect FICO (but not near as much as a short sale or foreclosure I think...)

[Lel]

First things first, you do not need to work through a 3rd party to get a loan modification.

There are a large number of "companies" that have sprung up in response to the housing crisis that has affected people around the country.  Very few of these actually deliver on their promises.

You can try to pursue a modification of your loans by contacting the lenders' loss mitigation or homeownership retention departments.  I recommend visiting the Loansafe.org website to learn about other persons' experiences in dealing with these companies.  Unfortunately, I believe Countrywide can be particularly difficult to deal with, and they are swamped with similar requests.

You may encounter some hurdles on your quest, as many people do.  For one, you already have fixed rate loans.  Most the people who are getting modifications have ARMs that are about to adjust, so it might be hard to get them to consider your situation.  If your interest rates are already reasonably low, there might be little that can be done.  Very few people are getting principal reductions at this time.

One of the reasons why people get modifications is because of a change in income that makes their original loans difficult to afford.  If, however, based on your current income, the lenders determine that you would be unable to afford the payments even after a modification, they may deny your request.  For example, if your income went from $8000 a month to $4000 and the best modification the lenders could offer you is a drop in payments from $3000 to $2500, you will probably still be denied because too large a percentage of your income would still be going to the mortgages.

Nevertheless, it won't hurt you to try - and it doesn't have to cost you a dime.

[Anonymous]

Thank you both -- you've confirmed, with excellent detail, what I'd generally suspected.  I'll put my energies and $$$ into increasing my income/paring any other nonessentials and let the Paramount Equity Kids & Green Credit Solutions earn their income off of others.

Cheers