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The Loan Modification Game: Square Pegs, Round Holes

The Modification Game:  Square Pegs, Round Holes

          So many homeowners are in what feels like no-win situations at the moment when it comes to modifications.  In the beginning of the modification, the homeowner is forced to show “hardship” to the lender.  For some the “hardship” is over years later.  Some homeowners have found employment and merely want to make their mortgage payment, but they can’t.  Once they try they are told by the bank that they owe so much in arrears that they have to pay those before a payment can be made.  Most people today don’t have $177,000 lying around, so the bank starts the pressure for a short sale or deed in lieu of foreclosure where you basically give the house back.

          I’ve watched homeowners struggle through the process.  I’ve seen them submit documents dozens of times only to have them lost, have to resubmit, and then end up declined for a modification anyway.  If modifications were the goal of the government, then why are so few of them going through?

          If you seek a modification, you soon find out that you have a new part time job.  For years, people battled dealing with different representatives on the phone in different states only to be told one thing by one person and another by another, and to have to resubmit documents to various places.

          The Office of the Comptroller of the Currency (OCC) mandated to the servicers that they develop a “single point of contact” for people in these situations.  Taken from the following article on their page, “The enforcement actions require the servicers to ensure that foreclosures are not pursued once a mortgage has been approved for modification and to establish a single point of contact for borrowers throughout the loan modification and foreclosure processes.”  http://www.occ.gov/news-issuances/news-releases/2011/nr-occ-2011-47.html

          How has that single point of contact helped?  The problem is that they cannot change the guidelines that bind loan modifications.  Many homeowners are told they do not qualify for the HAMP program (and very few will ever), but are not told that they can qualify for an “in-house” modification by the bank.  Yes, it is not over, not even with the big “No” to HAMP.

          Often the servicer you are writing to such as Bank of America or Chase has to get Freddie Mac or Fannie Mae’s approval for the loan modification.  Keep in mind the government bailed out these entities. This is the very problem with homeowners unaware of who actually holds their note.  I have seen servicers work out modifications only to have Freddie Mac file for foreclosure.  If you don’t fit, it may be the guidelines of these very entities keeping you out.  Always ask for an “in-house” modification from the servicer themselves.  The problem is resubmitting everything over and over again.

          I often have my clients send me the essential documents they will ask for and then just mail a current bank statement or tax filing to alleviate the pressure.  What people and unfortunately our government do not understand is the toll and emotional distress of submitting the same documents over the course of years.  Most of them are doing it because they were told to stop paying in order to obtain a loan modification, and feel as if they submit the documents they will be approved.

          That was the feeling from the beginning:  all homes would be modified and saved.  Years later we see the bank pursuing other “alternatives” to loan modifications with a homeowner still in disbelief because they jumped through every hoop they were told to, and no real understanding of what happened or went wrong.

          The problem was the servicer never told them that even if they jumped how narrow the hoop would be, and getting stuck in what seems a never ending process would leave them trapped.   Some tips to help:

1)   Keep asking and don’t give up.  If you are declined ask to be reconsidered again.

2)   Report any problems that you feel are unethical to your state Attorney General or the federal government.  Check out sites such as http://www.sigtarp.gov/Pages/home.aspx

3)   Ask for an “in-house” modification consideration if you are declined for the government programs.

4)   Keep sending in whatever they ask (watching what you admit to in letters of course).  Nine times out of ten they complain at mediation they cannot modify a loan because they do not have enough documentation.  Give them the kitchen sink so to speak.  Don’t give them an inch to come up with a reason to say “no” or they will.

5)   Watch out for insane deadlines.  Often you will get a request in the mail for documents that will be due four days later.  Do not be afraid to call and ask for an extension and tell them their deadline is unreasonable.  Have access to a fax machine and their number so you don’t waste mail-in time.  Virtual fax services online are cheap and run around $7-9 dollars a month.

6)   Consult an attorney.  An attorney can help send certain letters that will protect your rights and can attempt to find who actually holds your note and what the true basis for a loan modification denial is.

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