Consumer Law

Lenders Distract Homeowners With Modifications To Foreclose Quickly

By M. Stan Herring

Foreclosurebuzz.org has posted an article about the imbalance of high foreclosures and low mortgage modifications. Despite numerous government instigated programs to stave off foreclosures, the numbers of permanent mortgage modifications remain very low.

The Program?s own Loan Modification Report here, shows that as of January 2010 less than 4% of borrowers that are more than 60 days delinquent have received permanent modifications. The first step is obtaining a trial modification, and very few homeowners have been offered one (according to the report it?s about 37.3% of eligible borrowers).

A big reason for this is the conflicting information homeowners receive. Often they are told one thing on the phone doesn't coincide with information they have in writing. Loan servicers tell homeowners not to worry about the written documents because "it is part of the process" but then a few days later may turn around and decide to foreclose because the homeowner failed to submit a document or other information. Loan servicers are also notorious for consistently losing documents, even after being sent multiple copies, so it's a very real possibility that it's the servicer in error and not the homeowner.

As for the second step of the modification process, permanent loan modification, Bank of America was just sued for promising to make modifications to loans at a foreclosure clinic and failing to do so. So far in our office, we have seen one permanent modification. Bank of America and Wells Fargo were sued in Massachusetts for providing trial modifications, but failing to permanently modify the loan. Article here. HAMP guidelines are ridiculously weak. They allow lenders to continue the foreclosure process even when they are considering a modification application. See Supplemental Directive 09-09 here at Page 10. Lenders are prohibited from conducting a sale when they are still considering a modification, but what they say typically is that the borrower is not eligible the day before. Why not make that a clear ban?

If you would like more information on foreclosures, please check out our articles The Three Stages Of Foreclosure In Alabama and Wrongful Foreclosures In Alabama.

If you have further questions or concerns, feel free to contact us through our website or by calling 205-879-2447.

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Full post as published by Alabama Consumer Blog on March 04, 2010 (boomark / email).