The Obama administration and the banks are badmouthing “third-party modification companies.”The banks will do everything they can to convince you that you do not need representation. They will send forms directly to you without sending courtesy copies to your attorney or your modification company. They may send final settlement proposals directly to you and pretend your attorney or your modification company does not exist. Some lenders bad-mouth “third-party modification companies” in their music-on-hold recordings. Chase says it offers mortgage modification for free and to beware of any company that charges advance fees.

Their purpose is to get you to undermine your relationship with your lawyer or your modification company so they can negotiate directly with you. They know they can cut a better deal dealing directly with you than through your attorney.

A mortgage modification is a very big transaction. My fee is typically one percent of the loan amount, much less than the fees on a refinance. If I can lower your rate for the next 27 years by even a quarter percent more than you could do on your own, this will more than pay for my fee. You can represent yourself in this significant transaction. But should you?

The Obama administration does not make it clear, when they bad-mouth “third-party modification companies,” whether they are bad-mouthing just modification companies or also bad-mouthing modification attorneys. I would assume they are only bad-mouthing modification companies. But you must admit that the term “third-party modification companies” could include both.

However, lenders are clearly bad-mouthing both modification attorneys and modification companies.

Several banks have told my clients that they do not need legal representation. This in itself is giving legal advice. In giving legal advice, the lender is becoming the borrower’s attorney and exposing itself to liability.