FICO/Fair Isaac, the company that manages the all-important credit-scoring formula used by lenders when making mortgages, today unveiled Mortgage Relief Online, a new website that supposedly lets you know within seconds whether you qualify for a loan modification or refinancing under the Making Home Affordable Program.

Here’s Wall Street Journal blogger Mary Pilon’s take on the site/service:

If a borrower fills out the form and qualifies for free mortgage counseling, Fair Isaac will give applicants a free credit score and credit report. (You’re entitled to your free credit report once a year from each of the three credit reporting agencies at annualcreditreport.com.) But you don’t get a free credit score for just filling out the online form. (Applicants must complete a mortgage counseling session first.)

A handy flowchart explains how the mortgage-assistance process on the site works. However, Shon Dellinger, vice president for Fair Isaac’s consumer division, says “we don’t want to turn this into a site that people game for fixing their score. We want them to fix their mortgages.”

The Mortgage Risk Analyzer tool aims to identify mortgage holders who may be likely to default. The hope is that consumers can reconfigure mortgages before they become delinquent.

Considering that Fair Isaac also helps financial institutions manage the risk in their mortgage portfolios, it makes sense that they want to identify trouble before foreclosure proceedings begin. There’s also concern about more adjustable-rate mortgages resetting and the questionable effectiveness of mortgage modifications.

The information submitted by consumers is confidential. After borrowers complete the online form and find out what they’re eligible for, then the borrowers decide whether or not to send information on to a mortgage counselor. The mortgage counselor only passes on consumer information to lenders with the borrower’s permission. In other words, your lender won’t know that you used the site unless you let them know.

Ralph R. Roberts, GRI, CRS Award-Winning REALTOR® and Author Loan Modification For Dummies (avail. Summer 2009)

“The average American trying to get through [sic: to their bank] to negotiate a loan modification will not be able to get it done!”  - U.S. Congresswoman Maxine Waters (January 21, 2009)

You’ve probably heard the expression that an individual who represents himself in court has a fool for a lawyer. This often applies to loan modification, too. While you may be able to achieve some level of success by dealing directly with a reputable and cooperative lender, you can save time, effort, and anguish by hiring a qualified attorney or loan modification professional.

Having legal representation is even more important when the lender is inaccessible or unwilling to work out a solution, as nine-term U.S. Congresswoman Maxine Waters recently learned when she attempted to contact lenders on her own (click on the video below to see how difficult it can be):

Most people wouldn’t hesitate to call an industry professional when they need to borrow money, purchase a house, create a living will, or even fix a leaky roof. When considering a loan modification, however, some people assume they can negotiate a deal with their lender on their own.

While working directly with your lender’s loss mitigation or loan modification department is certainly an option, it’s not always the wisest choice, as Congresswoman Waters found out. You may be better off paying an attorney to negotiate on your behalf, just as you would hire an attorney to represent your best interests in court.

Remember, banks and lenders tend to protect their own interests (and who can blame them, really). They have a right earn a profit just like every other business, and they have a realistic expectation that the people who borrowed from them will honor the terms of their agreement. As a result, some banks and lenders reject loan modification applications because they feel specific borrowers can afford to make their payments if they would just budget more carefully and make what are sometimes unpleasant or difficult to accept sacrifices. Or, in other cases, they negotiate a loan modification that makes your budget so tight that even one missed paycheck or one large automobile repair bill can put you right back into default.

Hiring a qualified attorney or loan modification professional ensures you have someone looking out for your best interests. Now, you can find dozens of loan modification companies on the Internet, but one of the best ways to find a reputable professional is through referrals. If you have a friend, relative, or associate who’s been in a similar predicament and used a loan modification company to save their home, ask for the company’s name and contact information and how satisfied they were with the services they received.

Also, consider asking real estate professionals in your area for recommendations, including real estate agents, attorneys, accountants, and title company representatives. These sources can often lead you to the best in the business and help you avoid not only worst but the hassles of trying to do-it-yourself, as evidenced by Congresswoman Waters frustrating experience in attempting to deal directly with the lenders herself.

Ralph R. Roberts, GRI, CRS Award-Winning REALTOR® and Author Loan Modification For Dummies (avail. Summer 2009)