The reports from the federal government regarding the number of homeowners that have obtained permanent mortgage modifications under the HAMP program show once again how hopeless it is to rely upon government programs to resolve the mortgage crisis. Clients and advocates continue to ask me, “Why won’t the lender work with me on a modification?” I believe the answer is both simple and complex.
The simple answer is money….I believe the lenders have been incentivized not to approve modifications from their own financial perspective because they are getting both tax and subsidy benefits from their non-performing portfolio. The complex answer is I believe the program requirements are so complex and difficult to comply with that in order for the lender to obtain the subsidy benefits described above, they must obtain so many records and comply with strict documentary requirements.
The result is a maddening clash between servicers and homeowners who are working hard to obtain mortgage modifications. I attach below a recent exchange between a homeowner who is working hard to resolve an outstanding mortgage claim….reading this will make you want to pull your hair out….
This letter is a demand for additional review of Bank of America’s recent denial of my home loan modification. I have sent copies of this to various officials, agencies, and others via email or first class mail, which you can find listed below.
After careful review of your denial letter, I find your denial to contain fallacious reasoning—one which is nothing but a red herring,
Further, I have reviewed the PSA of CWALT 2005- 66 (which includes my loan) and the Guide referenced within this PSA, also known as Freddie Mac’s Single Family Seller / Servicer Guide, which will be referred herein as the Guide.
Your letter states:
” The investor has declined request for modification. Since the loan is not delinquent, for both a traditional modification and to qualify for HAMP, you needed to demonstrate imminent default hardship. One of the imminent default is defined as a long term disability status after the origination of the subject loan. Based on the documentation provided by you, including your statement regarding receipt of Medicare since 2001, you were receiving assistance prior to the origination date of (2005). As such, you are not a borrower and further the loan is not in imminent default as the assistance you received existed prior to the subject loan origination.”
There are serious and potentially litigious issues brought up in the above statements:
1. You state: The investor has declined request for modification.
My response: Why is this up to the investor? The PSA clearly states “…the Master Servicer may waive, modify or vary any term of any Mortgage Loan ….”. See Section 3.11 (b) pp.49-50 (CWALT 2005-66)
2. You state: Since the loan is not delinquent, for both a traditional modification and to qualify for HAMP“¦.
My response: One does NOT need to be late for HAMP; one needs to show a hardship where imminent default is likely. You (the servicer) are supposed to abide by the PSA.
Section 3.01 (b) of the PSA states that you SHALL follow certain rules/regulation such as Freddie Mac’s Single Family Seller / Servicer Guide which, states in part that:
“In pursuing loss mitigation, Servicers must first consider Borrowers in accordance with the requirements of Chapter C65, Home Affordable Modification Program.”
So, we turn to Chapter C65, which states in part:
Borrowers who are current ,”¦”¦.. but who, due to hardship, may be in imminent default, are also eligible for modification under HAMP. See: C65. 4
See question #22 from the above link. Do I need to be behind on my mortgage payments to be eligible for a modification under HAMP?
No. Responsible homeowners who are struggling to remain current on their mortgage payments are eligible if they reasonably believe they are very likely to default on their mortgage soon (often referred to by loan servicers as “imminent default”). This might be because a homeowner has had (or will have) a significant increase in the mortgage payment (due to a payment adjustment or rate adjustment upwards); “¦. or some other significant reduction in income; or some other financial hardship that will make the mortgage unaffordable.
3. You state: “¦.you needed to demonstrate imminent default hardship.
My Response; I did demonstrate imminent default— Loss of household income, change in household circumstances, significant increase in the mortgage payment if the Truth in Lending statement is correct. This was all documented at length in my hardship letter.
4. You state: One of the imminent default is defined as a long term disability status after the origination of the subject loan.
My response. I understand that, but it doesn’t pertain to my case. This is the red herring.
Disability is NOT the main issue. The main issues for imminent default as detailed in my hardship are 1) Upcoming increase in the monthly mortgage payment in 2010, 2) Loss of household income & 3) change in household financial circumstances, 4) Rising costs of living expenses, and 5) I briefly mentioned disability. I only mentioned disability in the hardship letter to let you know that my chances of returning to work do not look good and because I receive disability payments.
5. You state: Based on the documentation provided by you,
My response: Did you read my hardship letter?
6. You state: “¦.including your statement regarding receipt of Medicare since 2001, you were receiving assistance prior to the origination date of (2005).
My response: You asked me for this information and I provided it to you. I wasn’t sure why you wanted this information, but it now appears you are trying to divert the main issues and doing everything you can to block my attempts for an affordable loan mod.
Let me ask you””do you routinely ask others how long they have worked at a job and get such proof from the employer? If not, this act certainly appears to be discriminatory.
7. You state: As such, you are not a borrower
My response: This is a legal issue and you know that, especially due to the conflicting documents you sent to me. But if you insist that I am not a borrower– please file for a Satisfaction of the Mortgage since I signed the Adjustable Rate Rider promising to pay you every single month, among other things. Please review the Adjustable Rate Rider and the Rider to the Note for this predatory Pay Option Arm loan.
8. You state: “¦”¦.and further the loan is not in imminent default
My response: You appear to be ignoring the facts that there will be a ” significant increase” in the mortgage payments later this year, which is one of several reasons for my request for a loan modification now. Also, what about Loss of Household Income? What about the Change in Household Financial Circumstances and Rising Costs of Living Expenses?
9. You state: “¦as the assistance you received existed prior to the subject loan origination.
Like I said, this is a red herring. Please read my hardship letter.
I request an immediate review of my file and an immediate re-evaluation of my request for a modification. Your reasoning is faulty, and may be discriminatory. Please be assured I will do all I can to save my home, and I hope to be able to come to an agreement about an affordable loan modification in the very near future.
Thank you for your time into these serious matters.