Loan Modifications – The First Step Breaks Homeowners’ Hearts

Most homeowners who want to keep their homes have one thing in common: They’ll do almost anything to keep from missing a mortgage loan payment.

They’ll do without things, sell their toys, go deeply in debt on their credit cards, and even borrow from family members rather than default on that loan.

So the first step toward loan modification is heart-wrenching as well as financially dangerous. That first step is to stop making payments.

This, the banks say, is the proof they need that you are unable to meet the current payments. It verifies your hardship and makes you eligible for modification.

Unfortunately, it’s also the reason they sometimes use for denying a permanent modification. That is just one of the reasons, however. Some are denied because the bank decides they don’t have enough income to make the reduced payment (even as the homeowner has been faithfully making the payment). In other cases, homeowners were turned down because they took a second job to make ends meet and now their income was a few dollars too high. Another woman, after 3 years of submitting paper after paper after paper, was turned down because she didn’t file the right paper.

The greatest tragedy in the loan modification scam is the emotional and financial toll it takes on entire families.

It’s common for homeowners to struggle for 2, 3, or even more years to try to achieve a loan modification. During this time they’ve been shifted from one asset manager to another – and have been required to re-submit documents over and over again. And all this time they don’t know whether they’ll be successful or not.

When at last they’re granted a trial modification, they’re offered hope. In just 3 months they should be granted a permanent modification and life can get back to normal. But no. Even though the guidelines call for just 3 trial payments, they’re often told that there’s a delay – but keep making those trial payments.

One gentleman said he paid 14 trial payments before Chase decided he didn’t have sufficient income to continue. His attorney is filing a legal challenge.

And he is not alone. According to a lawsuit filed against JPMorgan Chase, the bank has “extended, delayed and otherwise hindered” the mortgage modification process in thousands of California cases. The nonprofit Housing and Economic Rights Advocates, who filed the class action suit, contend that the bank has profited from payments borrowers make in temporary modification payments. Then they foreclose.

A spokesman for the group says there’s a dark motive behind this behavior. JPMorgan Chase purchased Washington Mutual loans for pennies on the dollar. They could easily afford to modify these loans and still make windfall profits – but the profits from foreclosure are even greater.

And of course, Chase is not the only bank stringing people along. Complaints about Bank of America, Wells Fargo, and others are rampant on the Internet.

One Bright Spot…

Fannie Mae has recently announced that borrowers and their real estate agents can escalate problems with loan modifications and short sales directly to Fannie Mae, bypassing the asset managers.

We have yet to learn whether escalation leads to success, but it seems like a step in the right direction.


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