Consumer credit counselors, particularly those approved by the U.S. Department of Housing and Urban Development, can help with mortgage refinancing. The counselors are experts in loan modification programs, especially when the borrower is facing foreclosure. Help with refinancing is also available for borrowers whose mortgage is current.
Advice
The Federal Trade Administration suggests government-approved credit counseling as a far better alternative to for-profit firms for refinancing and loan modification programs. Some for-profit companies are legitimate, but the Federal Trade Commission reports that others engage in sloppy or unethical business practices. Some borrowers lose their homes to foreclosure while assuming so-called "foreclosure rescue" firms are successfully negotiating with their lenders.
Availability
Government-approved credit counselors, such as those affiliated with Consumer Credit Counseling Service, are available throughout the country and initial consultations are free. A listing of approved counselors is available on the HUD website. Help usually begins with a review of the borrower's credit and other personal finances, such as income, living expenses and debts not listed on credit reports. The counselor seeks to completely understand the borrower's financial situation before recommending options for refinancing.
Assistance
Credit counselors have relationships with local lenders and can recommend the best local options for refinancing based on the borrower's credit. Credit counseling agencies themselves do not lend money, but counselors will help with the loan application and assist in repairing credit, if necessary. Credit repair could include negotiations with credit card companies to lower interest rates and monthly payments. Counselors may also help with improving credit scores by assisting in legal and ethical removal of outdated or wrong information from credit reports.
Foreclosure
Counselors will act fast if the borrower is behind on the mortgage and needs refinancing to avoid foreclosure. The counselors are trained in all legal and ethical solutions for foreclosure avoidance, including refinancing through loan modification. Lenders use loan modification to change important terms of mortgage loan agreements, including the interest rate and monthly payment. Sometimes additional years are added to the loan to significantly reduce the monthly payment, with payments remaining fixed through the life of the mortgage. Credit counselors can participate in three-way discussions with the borrower and the lender to negotiate refinancing.
Caution
Lenders are not required to work with credit counselors, although most will. Also, the Federal Trade Commission acknowledges that some credit counseling agencies offer better service than others. Ultimately, the borrower's credit and financial situation will have the biggest impact on refinancing efforts.
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