Most companies that promise to help homeowners renegotiate mortgages aren't selling anything but pipe dreams.

Mitch Ryder and the Detroit Wheels once sang about a devil in a blue dress-but it might be time to make a sequel about a devil in a blue suit. These new evil ones are some loan modification specialists who say they can help distressed homeowners renegotiate mortgages.

No good reason

Loan modification companies are cropping up everywhere. They're preying on distressed homeowners who are eager to believe that there's a quick solution to remedy a mortgage gone bad. Unfortunately, the promises made by many of these suddenly high-profile loan modification specialists are the stuff of dreams, fictitious as any childhood fairy tale.

The reality is that a third-party loan modification company has no greater power than its clients to renegotiate loans and implement refinance mortgages. These companies may argue that they have inside connections, that they know the industry, or that they have a track record of success. But these factors, even if they're true, don't guarantee to sway a lender or loan servicer when money is on the line.

On top of that, these renegotiation specialists aren't working for free. Some of them charge thousands of dollars upfront for their services-and those are dollars that could be going towards the homeowner's past-due mortgage debt that he's trying to reduce in the first place. Even if the promised refinance mortgage happens, the borrower has to wait months to recoup the fees by way of the lower mortgage payment. Plus, given that a high percentage of loan modifications fail and have to be reworked, the modification specialist appears to do little more than dilute the homeowner's assets. And that's the best case scenario. In other situations, the specialist collects the fee and simply disappears.

Deception from the start

Loan modification companies also employ illegal and predatory tactics to secure their clientele. In California, myFoxLA.com reported last November that one modification specialist was using imitation court documents to scare homeowners; these documents directed those homeowners to call the loan modification company immediately for a solution. Other companies are using online videos, radio advertising, and aggressive telemarketers. All of these media are carrying the same, untruthful message: that loan modifications are the quick and painless solution to an impending foreclosure.

In truth, loan modifications are difficult to obtain. But this difficulty exists whether the person making the request is a homeowner or professional loan modifier. Lenders and loan servicers are slow to approve refinance mortgages and modifications because there's no proof that doing so will improve the lender's position. Many loan modifications end up in default again within the year. When this happens, the whole process starts over. But if the lender forecloses the first time, the home can eventually be sold, and some of the money can be recouped.

Of course, the devils in the blue suits aren't telling anyone all that. They're happy to go on encouraging desperate homeowners to believe in fairy tales.