Loan Modification can be done yourrself, provided you have the right foms, supporting documentation, and knowledge of how to structure your request.
These days there seems like an endless barrage of people who will attempt to sell you loan modification services for thousands of dollars, and try to persuade you that you cannot do this yourself. Another source by which the concept of loan modification is discovered is via the bank itself, which typically calls a borrower like yourself offering "loan modification" as a way to bring down your payments or fix a loan that is behind on payments.
First, dealing with the bank yourself without being armed with some crucial information is asking to pay more than you should. The bank has one agenda: get as much money from you as possible, so they make a token concession, calling you to offer a loan modification. They only do this because they fear your dealing with a professional will result in less money to them.
Before you ever negotiate with your lender, be sure you fully understand your options for loan modification. Our agenda for you is to help you negotiate the best terms possible for yourself, without paying thousands of dollars. In order to get the best terms, you will need professional advice.
But you don't need to pay thousands of dollars for it, when an e-book and some coaching from former bank employees is available.
Generally there are two major strategies used in loan modification: "hardship" and "forensic audit". A forensic audit is a technical review of the initial loan documents, looking for the slightest legal violation in the initial loan application. This is done on less than 3% of all files, can cost thousands of dollars to have an attorney review, with no guarantee of success. It is the least-used strategy for a reason.
The most common type of loan modification is a simple financial negotiation showing the bank that it's less of a loss for them to modify your loan than it would be to let the home go into foreclosure and risk not being able to sell it. For anyone with an adjustable loan that is in the adjustable portion, or who has a pay-option-arm, sometimes called a "Neg-am" or "Negatively Amortizing" loan (often with a 1% or 1.95% payment option), the need for a loan modification is clear and easy to push through. For anyone on a fixed loan, this requires more work demonstrating how a "hardship" happened such as medical, divorce, or major unexpected expense or loss of income that is now generally corrected. This requires a tricky balancing act: showing you cannot pay the current loan, but can pay a modification that you propose.
Loan modifications vary by state, by lender, and by borrower. Prime candidates for loan modification are people behind on their payments, with a high loan-to-value ratio (including someone "upside down" by which they owe more than the home is worth), but who can fundamentally make most of their house payment. Rates vary but are sometimes as low as 3.5%, and other times the rate is left unchanged but a principal write-down (aka reduction) is taken, so the borrower is no longer upside down. This can make staying in a home more attractive for borrowers who are considering walking away from their problem loan. Also, some lenders are more aggressive than others, due to the efficiency of their foreclosure department and amount of foreclosures in your area. If there are a lot of homes for sale that aren't moving in your area, you can bet that lender has more financial incentive to reach a deeply discounted loan modification on your mortgage.
