In the wake of the mortgage and foreclosure crisis that has plagued the nation over the past several years, you may have noticed an increase in advertisements for mortgage counseling services. These companies, which target not only homeowners but mortgage bankers and brokers as well, promise to help homeowners who are delinquent on their mortgage modify the loan’s terms to avoid foreclosure. In exchange for these services, homeowners are asked to pay an upfront fee. The only problem? Requiring payment of upfront fees is illegal in Illinois.

What is a Loan Modification?

Loan modifications alter the terms of an existing mortgage to make payments more affordable for a homeowner who is in danger of defaulting. In most cases it is done prior to a scheduled rate increase, for example when a five-year adjustable rate mortgage (ARM) is about to end, but can also be done when the mortgage holder’s circumstances have made it impossible for him to continue to make payments under the current terms of the mortgage.