Mortgage companies are rolling out modification programs to help strapped borrowers who are behind on house payments. However, it appears that not all of the “help” is going to have its intended effects.

A recent article on forbes.com states, “the mortgage industry claims it has provided relief over the last two years to 4 million homeowners who were having trouble paying their mortgages. But all help is not created equal.”

Here are four things that you should watch out for when it comes to loan modification programs:

1. Credit Score ‘hits’ – Some programs that are called “forbearance” plans will allow you to make lower payments for a period of time (usually six months). These lower payments are 50% of a normal payment and still include the escrow amount (if you have a loan with this option). But, you will most likely take a hit on your credit score as the mortgage company will report your payments as “late.”

2. Adding loans onto loans – Some mortgage companies are offering loans to help home owners to be able to get caught up on their payments. But, what really happens is that this money is in turn added on to the end of the loan and must be re-paid along with the principle and interest that is accruing on their original mortgage. This practice eats up equity and represents a financial set-back for the homeowner.

3. ARM to ARM modifications – One serious tactic is for a mortgage company to offer a loan modification program that is just another Adjustable Rate Mortgage. The payments are attractive and look like they will help the mortgagee be able to keep their home, but later they discover that the payments begin to rise again to unaffordable levels. The way to avoid this is to agree only to modifications that are based on a fixed rate of interest. A loan modification program needs to provide long term relief, not just short term. Check our ARM Loan Payment Calculator to see what your payments might be.

4. Temporary Interest Rate reductions – Some companies are reducing interest rates for just a short time period to help homeowners be able to make their payments. Real and lasting help has to include permanent modifications to a mortgage.

Be alert for any hidden fees or costs that are incurred as a result of a modification. Also, always ask to see any modification in writing before you enter into an agreement. Full disclosure must be a part of these programs.

Because loan modification programs are created outside of normal laws and practices, there is a tendency on the part of some mortgage companies to use them to their advantage. Real help provides support for borrowers regardless of the benefits to the mortgage company.