Loan Modifications Causing Foreclosure?

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Associated Press has posted an article that discusses how loan modifications have been pushing some homeowners to foreclosure.

Jacob Adelman, writer of the article, cites the example of Mr. and Mrs. Casco, of Long Beach, CA, who weren’t behind on any mortgage payments and were offered a reduced payment plan by their bank, JPMorgan Chase. They chose to sign up for the program and continued to stay on top of their monthly payments. Then JPMorgan decided that the smaller payments, that the bank itself had set, wasn’t enough and then foreclosed on the couple’s home. Amazingly, the bank says that the couple was treated fairly.

“We worked with the borrower to give him as many opportunities as possible to qualify for a modification,” he said. “However, they were not able to do so and therefore we were forced to foreclose on the property.”

Sadly, this is not the only example of banks not living up to their end of a mortgage modification. Statistics from the Treasury show that about one-third of the 1.4 million homeowners who signed up for a mortgage modification have had their mortgage permanently modified.

Several lawsuits have been filed in Boston that accuse major lenders of violating their contracts under the Home Affordable Mortgage Modification Plan (HAMP). The lawsuits say that the banks agreed that if homeowners paid their trial modified mortgages on time then it would become a permanent modification. Instead, attorneys say that some homeowners’ mortgages went back to the original amount, which they were unable to pay, which then pushed them into foreclosure.

In San Francisco, the Housing and Economic Rights Advocates legal services group sued Chase, accusing the New York bank of profiting from collecting payments during long trial modifications that ultimately end in foreclosure.

“They’re participating in the crisis they had helped to foment by refusing to honor loan modifications they had already agreed to,” said attorney James C. Sturdevant, whose firm is assisting in the lawsuit.

Laurie Maggiano, policy director at the Treasury Department’s Homeownership Preservation Office, commented that banks have been “encouraged” to offer trial modifications to qualified homeowners and the banks aren’t obligated to make the modification permanent until this June. In June new regulations stopped loan servicers from offering modifications just based on homeowners’ “stated income.”

Now, incomes and other details are being fully vetted before trial periods, and borrowers are preapproved for a permanent modification as long as they make three trial period payments, she said.

She also said banks are only obliged to grant modifications if the investors who hold the mortgages also benefit from the modification, as mandated by the October 2008 legislation approving the bailout.

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. You may also obtain a copy of our free book on stopping wrongful foreclosures and the problems of hidden fees by emailing us.

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