Horror Stories Archives – Refinance – Mortgage Refinancing Rates And Information

Loan Modification Horror Stories, What Are The Lessons?

February 8th, 2010 No comments

HAMP’s loan modification program seems to be finally speeding up its conversion rate from trial loan modifications to converted modifications. However, the 4 million troubled homeowners targeted by the program are not even close to receiving the help they need.

The debate continues on exactly how much responsibility the Government has towards troubled homeowners. Should they simply shoulder their responsibility, lose their home and start from scratch?

One, obviously upset, commentator had this to say about the issue:

How many people seeking home loan modifications used their home as their own personal ATM’S? How many people who are seeking loan modifications bought homes using an interest only ARM, and purchased a home they could not afford? How many people “fudged” their mortgage apps in order to qualify? I have no sympathy for them. I do feel sorry for those who were really victims of poor mortgages, and job loss. I think more people made poor personal choices and want others to bear the responsibility for their poor financial choices.(Quoted from a comment on the RGJ.com, Reno Gazette Journal online edition 31/1/2010)

This opinion is by no means unique. Many, especially those that didn’t buy a home because they felt they couldn’t afford it, feel people are being unfairly shielded from their own bad financial decisions.

However , the distress and misery the current credit crisis has created does make most of us feel the Government has some responsibility to stabilize the situation just as it did when the banks were the ones that needed bailing out.

Sadly, even those that do receive some kind of “financial help” on their mortgage are often just taken advantage of. The media is full of cases of troubled homeowners that qualify for a loan modification just to see their monthly mortgage payments are more expensive and they are deeper in debt and deeper underwater on their mortgage.

The Government has issued some new guidelines that put more pressure on servicers and lenders to reduce monthly payments by extending the loan term to 30 years and dropping the interest rate to current low levels of 2%-3% for a fixed 30 year loan. Unfortunately, servicers were often simply picking up the months the borrowers were behind on and loading them on the mortgage, without actually modifying the loans in any useful way for the homeowner.

The lessons we can learn from these situations are important although often of little value for the homeowners that are suffering the consequences of poor financial judgment and unfair lenders.

Lesson 1.) Do not spend your life savings paying a loan modification company to manage your application. If you do decide to hire such a company check their credentials and find out their history.

Lesson 2.) Never pay for any services before they have been carried out. This is not only illegal in most states it is also rather stupid. Would you pay a day worker on a farm before he started?

Lesson 3.) Contact the HAMP free counseling services before you are committed to a loan. Even if you later decide to go a different route you will at least have one opinion you can use as a benchmark. Contact a lawyer and ask him what your options are. Is there any way to fight the legality of the loan? Do you have any leverage on your bank?

Lesson 4.) Loan Modifications are not the holy grail of mortgage woes, they are not for everyone and they don’t always improve your mortgage payments all that much. Even though it will severely affect your credit score foreclosures and short sales are often a way to have a fresh start and are sometimes more practical than hanging on to a sinking mortgage. They are, obviously, not an ideal option but sometimes they are best of two evils.

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How To Spot A Loan Modification Scam Before You Are A Victim Of It.

February 6th, 2010 No comments

The media has been rife with horror stories of scam artists preying on one of the most vulnerable sectors of our population, troubled homeowners and their families. However, many homeowners just haven’t got the message so we shall revise a few of the signs that can help us spot a loan modification scammer.

These leeches of society will ask for exorbitant fees from homeowners too worried or clueless to see they are paying a thief for something they could do for free.

It must be said beforehand that, as in so many other industries, the many pay for the sins of the few, and that most loan modification agents are just trying to make a decent living providing a service.

Scam Alert 1. Charging Upfront Fees.

It is illegal in many states to charge upfront fees, or fees for services that have not been provided yet. Even for states where it is not illegal it is certainly a clear sign you are dealing with a potential scammer. Stay well away from any company that tries to charge you with upfront fees.

Scam Alert 2. They Guarantee They Can Stop Your Mortgage From Foreclosing.

This is another red flag for loan modification companies you don’t want to touch with a seven foot pole. Nobody can guarantee a servicer will provide a loan modification and stop a mortgage from foreclosing. Not even the Government has been successful at forcing servicers do that, it is unlikely your loan modification company downtown is going to be able to.

The truth is that there are free loan modification counseling agencies that will provide you with all the information you need. We are used to paying for a good service and feel that the free option must be in some way of inferior quality than HAMP counselors. These counselors are not volunteers working out of charity; they are paid by the Government, just not by you.

Scam Alert 3. They Ask You To Stop Paying Your Lender And Start Paying Them.

It is amazing that anybody would fall for this, but we do. The companies will claim that you need to be behind in your payments in order to qualify for a certain loan modification or that they will take care of the payments or any other kind of bogus explanation. Don’t believe it. You do not need to be behind in your payments to get a loan modification you just need to have proof that you can’t afford the current payments. Work on your hardship affidavit, but whatever you do don’t stop making payments. It will only make things worse by further dropping your credit rating.

What Should You Do?

Your best option is to call your state’s HOPE hotline at 877-462-7555 and ask for your closest nonprofit housing counselor or check it out yourself here.

Loan Modification Companies will tell you that you need their help to fill in forms and that nonprofit counselors don’t have your interests in mind like they do. It can be faster and easier to use a loan modification company if you can afford it. Just be careful you don’t become another mortgage modification scam statistic.

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Loan Modifications Latest Figures, Limbo, Trial Purgatory And Other Horror Stories

January 22nd, 2010 No comments

Last Friday Treasury revealed the latest data on HAMP, the Administration’s major foreclosure prevention program. The data has been sold as evidence of the significant progress made from pressuring mortgage servicers. Are loan modifications finally becoming the solution for the mortgage crisis as the Government has always claimed?

Let’s have a look at the figures.

Around 900,000 homeowners have entered the program with a trial loan modification. 66,465 homeowners have received permanent modifications as of December 31^st. That’s where the good news lies, November’s figures for permanent loan modifications were half that, at 31,382. This progress is being reported by Treasury as a “significant acceleration of the rate at which borrowers are being approved”. Hard to argue with that when the numbers doubled in a month, but is it enough?

Let’s have a closer look at the figures and the program as a whole.

The program is designed to allow homeowners to enter a three month trial loan modification, during which they are supposed to provide lenders with all the documentation required for a permanent modification. However trials are stretching for much longer. Servicers blame homeowners being slow at handing in paperwork; homeowners blame servicer of losing paperwork and making mistakes. Treasury’s response to this mess has been to allow for longer trial periods, up to 5 months. However mortgage servicers have kept homeowners in what is being called “trial purgatory” for up to nine months.

This seems to be one of the big issues the HAMP program faces, a complete gridlock of loan modification trials. Have a look at these figures:

In October Treasury reported that 487,081 trial modifications had been started. Three months later not even 24% of those trial modifications had been resolved one way or the other. Let’s put this another way 76% of the current trial loan modifications are in limbo. Treasury has pointed out that 46,000 homeowners have been approved for a permanent loan modification but are yet to sign the paperwork that will make it final. Even if this were true it would still mean that 66% are still waiting for a verdict on their loan modification.

Consumers are blaming big banks for creating this loan modification limbo and the figures seem to support that claim. The big four banks, Bank of America, JPMorgan Chase, CitiMortgage and Wells Fargo represent more than 60% of the 3.4 million mortgages eligible for the HAMP program. The best of the bunch Wells Fargo has only completed 13% of its eligible loan modifications. The rest are doing much worse. Bank of America the largest mortgage provider by far is performing the worst, converting only 3% of their 1 million eligible mortgages into permanent modifications.

No matter how Band of America tries to window decorate these figures advertising they have surpassed the 200,000 trial modifications barrier, this is all rather pathetic. We are not even saying they should convert more trials into permanent loan modifications but at least put homeowners out of their misery and tell them what the outcome is, one way or another.

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Loan Modifications Short Guide To Success Part 3 – The Endgame

December 13th, 2009 No comments

This is our last week in the Short Guide to Loan Modification series. Look out for the links to official websites and resource packages at the end of the article.

Third Step. Tell the lender, giving you a loan modification is worth their effort.

Lenders are not charitable organizations. They lend for a profit not out of kindness. However if you can convince them that giving you a break is in their interest, that you are worth more as a borrower with a modified loan than as a foreclosure you are half way there. Explain the reason you are struggling to pay, illness, untimely death and losing your job are the reasons most likely to work.

Fourth Step. Put it in writing.

Send a written request for a loan modification. Make it short and to the point, one page should be enough, provide all the information you compiled in the earlier steps, why you need the loan modification, why it is a good investment for the bank, etc… Send all correspondence with your lender through certificate mail with return receipt requested, there are too many horror stories of lost forms.

Fifth Step. Call your lender.

Good idea to start with your loan servicer, the place you bought your mortgage from. Write down the name of everyone you talk to. Only talk to people who can help you and make decisions on your mortgage like officers in the mitigation department of your loan servicer. It is a good idea to send you letter with all your information to the person you have talked to over the phone.

Sixth Step. Be patient, follow up.

Unfortunately loan modifications can take as long as nine months (sometimes more) after you file in your application. So make a pain of yourself and follow up on the progress of your modification with calls, emails and faxes. Don’t underestimate the power of persistence, some officers might work faster just not to have to talk to you again on the phone.

Seventh Step. Get Help from the Professionals.

If you are not satisfied with how you are being treated contact the OCC. The OCC regulates all national banks. You can find a complaint form at www.occ.treas.gov/customer.htm

If you are having trouble working through any of the previous steps, like contacting your mitigation department, visit HOPENOW.org or call 888.995.HOPE and they will help you out.

You can also visit www.hug.gov for help in finding free certified housing counselors and www.loansafe.org for troubled borrower’s resources.

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Loan Modifications: The Loan Workout Formula To Accelerate Your Modification

November 15th, 2009 No comments

The News is littered with horror stories of homeowners that have been taken for a red tape ride, paperwork is lost, or applications are dropped because a vital piece of paperwork that was never actually requested is missing, all while homes are ultimately and tragically lost.

What can be done to accelerate this process and avoid being a main character in one of these horror stories. The truth is that there are no magic solutions, in some cases loan modifications are simply not an option.

That said, lenders have come up with a kind of formula to speed up loan workouts. If you fit these standards you can get relatively quick help, if you don’t you must wait for the traditional case by case process. Unfortunately there are no guarantees and seemingly great candidates have also been abused by the system, but knowing the system lenders follow to fast track loan modifications can only help.

So what are the requirements?

1) Your loan must be at least 60 days past due. Some banks require at least 90 days. One of the reasons for this is that the bank needs to be sure you really can’t afford the loan. If you are struggling but can make the payments Banks are not going to want to throw money away at a loan modification.
This does not mean I am recommending you to not pay your mortgage payments. Every case is different and in some cases you have more leverage on your bank if you have a good record. Check out www.hud.gov to find out where your closest mortgage counseling office is to get personalized advice.

2) You need to prove you can’t pay your mortgage. Your expenses must exceed your income. Be ready with pertinent paperwork, you will be asked to prove this.

3) The loan modification must be a long term solution. That means the cost of the monthly payments must be under 38% of your monthly income.

4) You can’t be in bankruptcy.

5) A loan modification must be a good deal for the lender. That means that the cost of modifying your loan must be cheaper than what the lenders would lose if they went ahead and sold your home. For instance, if you live in an area where homes did not fall in price and there is a high demand of houses (not sure where that would be, but let’s imagine) then the lenders are very unlikely to accept your lower interest and reduced principal balance requests when they can simply foreclose on the mortgage and sell your home for the same price or even a potential profit.

6) You need to be able to prove that you can make the modified payments and that you will not default again.

Again, these requirements will not guarantee an approval but will increase your chances. The main point you need to get across to your bank or whoever the owner of your loan is, is that you are a good investment. That you are worth more money as a client than your home is worth with a foreclosure.

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Loan Modifications, Servicers and Who Is Profiting From the Credit Crisis

November 4th, 2009 No comments

The news is full of loan modification horror stories describing how homeowners have struggled for months with lost documents, changing standards, unreasonable loan modification agents and the slow tides of bureaucracy. Bad news does always seem to travel faster and further so you don’t hear half as much about the hundreds of thousands of loans that have been successfully modified.

However the question still remains why loan modifications are moving so slowly if the government is willing to pay the bill for the expenses mortgage servicers and investors have to incur when modifying a loan. Recent studies seem to indicate the reason is that the incentives and handouts the government is making through HAMP and TARP just don’t cover the real cost of modifying the fast increasing volume of loan modification applications.

How can this be so when TARP and HOPE have deep pockets of over 75 billion dollars? The answer seems to lay in the mortgage servicers, the companies that collect monthly mortgage payments and then distribute them to the investors that lent the money in the first place. Mortgage servicers have found it is often cheaper to foreclose on homes than to offer a loan modification even though a loan modification would benefit both the borrower and the investor.

The key is not only the rate of return when managing loans and loan modifications but the expenses related to the operations. The assumptions we generally have as consumers is that foreclosures are a bad deal for everyone. Numbers that are thrown around for example are losses of 10 to 20 percent for lenders on short sales while lenders have to face 20 to 30 cents to the dollar when dealing with foreclosures.

These figures only tell part of the story, mortgage servicers have other ways of measuring profit and often have different priorities. A recent report examined foreclosures between 1995 and 2009 and found that loan servicers made more money by offering forbearance (a period of time where the borrower does not have to make payments so he can consolidate his finances) than by cutting principal or reducing rates of interest, which is what loan modifications do.

This means that when deciding between foreclosure and loan modification loan servicers have to choose between certain loss with loan modifications and potential profit if they foreclose the loan. What would you do? Exactly. This is why loan servicers have been dragging their proverbial feet with loan modifications. Of course there are also other issues to consider like public opinion and bad publicity. The government has tried to use this weapon by publishing loan modification leagues that encourage banks to reorganize their systems to increase loan modifications.

So what is the solution? No easy fixes obviously or they would have already been implemented. However the administration could enforce stricter rules that regulate foreclosure and make loan modifications more attractive like regulating loan originations, mandate loan modifications before foreclosure or have third party loan modification mediation programs that control what mortgage providers do.
The best thing you can do now if you are at risk of foreclosure or behind in your payments is to contact the HOPE program by visiting their website or calling 1-888-995-HOPE.

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Loan Modifications, Story Of Struggle For Banks And Borrowers Alike

October 21st, 2009 No comments

If you have been watching the business or economy sections of newspapers, news or blogs you will have got your fair share of loan modification horror stories. At the same time banks are increasing their capacity for loan modifications and seem to be keeping up with government targets, at least for now. So who is to blame?

Are borrowers complaints valid or simple self pity for a situation banks cannot be blamed for? Or, are banks dragging their feet and ignoring the plight of borrowers despite the government being happy to pay the cost for loan modifications.
The Sun Sentinel reported this week on the plight of Kraig and Ana Weiss. The Weisses first agreed to a loan mofication with Bank of America only to have the bank take the offer off the table. Now Bank of America is moving towards foreclosure even though the Weisses are making their mortgage payments.
The strange thing is that federal reports show that banks are restructuring home loans for troubled borrowers, but stories like that of the Weisses are heard all over the country. Where does blame lay, do banks not care or are they doing the best to deal with bad clients that are struggling with unemployment and a worldwide credit crisis.

Counties like Broward and Palm Beach show how hard things are getting with 14,000 homes in risk of foreclosure in August. However banks and service providers claim to be doing their best to deal with the millions of foreclosures requiring a loan modification.
So far the Treasury Department announced they are on target to provide the projected 4 million loan modifications by 2012 after hitting their first goal of 500,000 trial loan modifications a month early.

However this apparent success might cover the fact that only 16 percent of eligible home loans have been modified so work has only begun. The Congressional Oversight Panel for one does not seem too optimistic of the loan modification program performance. Last week the Panel reported that the federal program may not reach the long term goal and encouraged the Treasury to improve their HAMP program or to create new programs to meet the expected rise in foreclosures due to the rise of unemployment.

This rise of foreclosures is fed by a change in the market since the HAMP program started. At the beginning of the year the big trouble were subprime mortgages with high interest rates and devalued price tags that did not allow borrowers to improve their interest rates. However the rise of unemployment has now caused borrowers that have prime mortgages and that would normally be within their means to be at risk.

This means that loan modifications’ main weapon to make mortgage payments affordable, lower interest rates will not be a significant help for prime mortgages that already enjoy low interest rates.

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