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“We need you to show a hardship. However, we see you are current on your mortgage, and that shows you do not need a modification”

October 3, 2013 1 comment

Now in 2013, it is safe to look back and realize that when Bank of America took over Countrywide’s loans (allegedly) that they inherited a mess.  We realized that years later when we learned of Countrywide schemes that are now the subject of litigation.  Schemes such as the “hustle” would drown homeowners in a matter of years, while the bank made sure enough time had gone by to present a statute of limitations argument against homeowner claims.

Sickening.  We know there was fraud at the inception of these loans, and borrowers were not getting the deal they thought they were, and we know there is clearly fraud at the end, as over and over we see the wrong bank in court.  What about in between?  Have we stopped to think about what Bank of America did when they realized what they had purchased (allegedly)?

What did they do?  They had a systematic plan from the beginning. They knew that adjustable rate mortgages would go up to the point where the homeowner would need help and call to inquire about a modification.  They knew Countrywide had given plenty of those type of loans at the height of the market.

The conventional loans were a bigger problem however.  If the payment remained the same then this underwater loan with a high risk of default would stay on their books, and no one wanted that.  Too high of a risk.  So the conventional loans began to see an “escrow shortage”.  Now granted escrow accounts fluctuate, and payments go up if taxes go up or if insurance does.  How does Bank of America explain an escrow shortage of $12,000 in a little over a year?  Would taxes and insurance have risen to the point of an extra $900 a month?

We’ve seen forced placed insurance that is egregious.  I’ve personally seen earthquake insurance being escrowed against a homeowner in North Florida.  A check of the USGS will show you there are no fault lines here, however.  We’ve seen escrow shortages that truly don’t add up.  Is that how Bank of America and the other big four banks decided to get rid of the conventional loans that they really didn’t want?

They knew the adjustable rate borrowers would call, and a conventional borrower would too if escrow caused their payment to act like an adjustable rate.  And that is where both types of borrowers were given the same line:  “We need you to show a hardship.  However, we see you are current on your mortgage, and that shows you do not need a modification”.  And both borrowers would fall for it understandably.  The person who alleges in court they are the holder of the contract (mortgage) just changed the terms in a big way.  Fannie Mae’s new guidelines for servicers even show they are now aware of this.

Now take the Bank of America affidavits and do the math.  1) No intention of qualifying the majority of applications for HAMP; 2) giving incentives to employees for putting homes into foreclosure or “in-house” modifications because they were more profitable and “in-house” modifications had a higher interest rate than HAMP; 3) HAMP didn’t require a borrower to stop payment for a modification but ironically a borrower is required to be 60-days behind for the “in-house” modification that Bank of America preferred as stated by their employees.

Thus, the borrower is lured into default and into Bank of America’s trap.  The never-ending modification cycle with no intention of giving one.  To the homeowner, it is losing a home when they truly did nothing but follow the bank’s instructions, To the bank, it is an improved portfolio.  Which should our justice system protect?