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Loan Modification and Mortgage Foreclosure Scams
The foreclosure process is under scrutiny after revelations that some loan servicers violated the rules. Now the focus may be shifting to the loan modification process, which has failed to prevent as many foreclosures as once hoped.
Lawsuits have proliferated this year, filed by homeowners desperately trying to hang onto their homes, and who say loan servicers lied to them, gave them erroneous information and lost their paperwork as they tried to modify their loans.
San Francisco's Housing and Economic Rights Advocates, a legal services group, has sued JPMorgan Chase, accusing the bank of exploiting homeowners with trial modifications, only to foreclose on their homes.
The government-backed modification effort, the Home Affordable Modification Program (HAMP), launched in April 2009, has encouraged lenders to help struggling homeowners avoid foreclosure. About 1.4 million homeowners have entered the program but only 500,000 have emerged with modified mortgages. The rest? Most have lost their homes to foreclosures.
Since January 1, 2010 there have been 1,756 complaints about home modifications posted on ConsumerAffairs.com. One of them is one from Debi, in Scranton, Pa., who said she was both shocked and relieved to see so many other complaints that mirrored the problems she was experiencing with American Servicing Corporation.
"The company offered to 'help' us by setting us up on a modification program," she told ConsumerAffairs.com. " All seemed fine for two years. They dropped approximately $200 from our payment of $1.350. Then in March 2010 they put is on their 'trial' basis of three months. Still not sure why."
Debi said the bank continued to withdraw their modified payment of $1176 from her account for four months. Then the following month she received a check from the bank for $946.
Calling to inquire why the bank would be sending her money, Debi was told that she had been withdrawn from the trial modification because she had not sent all the required documents. Debi says she sent every requested document, at least twice. While she was reapplying for the modification program, she said she received notice from the bank that they were putting her in a short sale. She was losing her home.
What do we do now?
"We have been in this house for over 20 years," she said. "Are we just supposed to stop fighting, give in and move out?â€
Countrywide Finance customer Janette, of Simi Valley, Calif., believes the whole modification process is seriously flawed. She complains that she can't obtain accurate information and the process is drawn out over a year or more.
"The longer it takes the further behind we fall,â€ she says. "Then, if the modification is approved the payment is higher, as there's more past due payments included. Something needs to be done now.â€
of Forest Lake, Minn., says Chase has been giving him the runaround for 18 months. He said he tried to work out a modification but the bank eventually rejected it and began foreclosure proceedings.
"I found a credit union that was willing to pay off the loan and start fresh but Chase has added $37,000 to my loan and now the credit union is not so interested in loaning this extra money,â€ John told ConsumerAffairs.com. "My loan officer said it's unheard of to charge anyone this kind of fee and refused the loan. I'm tired of dealing with the number of people at Chase that hand off my phone calls. You never get the same person and no one can give you an answer. They just pass you on to the next number and it can go on for hours till you give up. The Attorney General's office is tired of hearing the calls come in and you would think someone would help the general public. What's their job? But this bank has figured out how to strip its customers of the little cash they have in their home or pocket and have no fear of anyone telling them what they are doing is wrong.â€
In her testimony before Congress last month, Julia Gordon, of the Center For Responsible Lending, said HAMP's performance has been disappointing, despite the half-million families that have gotten a second chance.
Fallen fall short
"HAMP has fallen far short of its initial goals for helping individual homeowners and has remained well behind the curve of additional foreclosures," she said. "Worse, many families encounter an incompetent or even predatory mortgage servicing system once they apply to the program, experiencing delays or denials that are inconsistent with the promise of the program guidelines.â€
Gordon said hundreds of thousands of people who received trial modifications during HAMP's initial phase have ended up in a worse financial situation as a result of their participation in the program if they do not get converted to a permanent modification.
The reason? During the trial period, when they are making reduced payments at the direction of their lender, their lender is also reporting them as delinquent to the
credit bureaus. Not only that, but late fees and interest continue to accumulate, resulting in a large addition to the debt at the end of the trial modification.
Like a dangerous, high stakes roll of the dice, those who enter the modification process but come up short often find them in even more dire financial straits."The continued insistence by Treasury officials that HAMP is working has contributed to deep cynicism in those who have interacted with participants,â€ Gordan said.The credibility of the program has been further undermined because it has not been transparent and has not created adequate enforcement mechanisms.
Category: American mortgage