Why are modifications being undermined when they would so obviously preserve the value of the “loan?” The answer is because the real party in interest in the foreclosures is the servicer, not the trust, which doesn’t own the loan anyway, nor even the investor/beneficiaries, who reap very little out of the proceeds of foreclosure.
The servicer wants the loan to fail. The investor expects the servicer and trustee of the REMIC trust to make sure value is preserved. But that isn’t the game. If the property goes to foreclosure sale then the “servicer” can make its claim for “recovery” of “servicer advances.” The fact that “servicer advances” are made from a pool of funds established by investor money and the fact that the servicer accesses these funds to make payments, regardless of whether the borrower pays or not — all of that makes no difference in the game.
In that context a modified loan is worthless. A failed loan is the gold standard.
HAMP Modifications Sabotaged to Fail by the Usual Suspects
By William Hudson
On January 27, 2016 The Special Inspector General over the Troubled Asset Relief Program (SIGTARP) released data on the poorly executed and enforced Home Affordable Mortgage Program (“HAMP”) that shows that the banks not only have the right to modify loans they don’t own, but have no interest in helping homeowners save their homes through modification when they can set the homeowner up to fail.
HAMP was created to provide sustainable and affordable mortgage assistance to homeowners at risk of foreclosure but has instead forced many homeowners into foreclosure by requiring homeowners to miss payments, revoking approved modifications and a slew of other unethical practices.
The Inspector General writes that, “mortgage servicers administering HAMP will continue to need strict oversight in upcoming years because apparently the servicers are unable to implement and properly administer the program without resorting to sabotaging compliant homeowners.”
The audit notes that the “largest seven mortgage servicers in HAMP over the most recent four quarters show disturbing and what should be unacceptable results, as 6 of 7 of the mortgage servicers had wrongfully terminated homeowners who were in “good standing” with their HAMP modifications.”
These failure rates demonstrate that servicer misconduct is continuing to contribute to homeowners falling out of HAMP by terminating the agreement when homeowners are making timely payments. This practice is an obvious attempt to put homeowners at risk of losing their home so that when the foreclosure occurs, the servicer can swoop in and steal the home while keeping all of the homeowner’s equity, payments and improvements.
This study provides further documentation that homeowners are being forced out of the HAMP program for no reason and that servicers are using HAMP as another tool to steal homes. If the servicer can keep the homeowner in a state of vulnerability, create further arrearages and provide the homeowner contradictory and confusing information- their chances of taking back the home increase exponentially. This is the modification business model of the major loan servicers.
The servicers are running the show and the government is apparently impotent to stop them from their illegal tactics. The treasury admits that they have no idea how many other homeowners were forced out of HAMP. I can attest that I was one of the homeowners forced out of a loan modification in which I was 100% compliant. For a year I repeatedly applied for modifications, sending in documentation and spending hours and hours going through CitiMortgage’s futile application process. Either CitiMortgage representatives are completely incompetent or their modification process is intentionally set-up to create such a diabolical application process that most borrowers give up.
Thirteen applications later and a year later I was granted an “approved repayment plan” that required three timely payments before becoming permanent. If all three payments were made by the first of each month I would be given a permanent modification with no need for further qualification. After making the third timely payment by certified mail I didn’t hear back from CitiMortgage. By then I was familiar with their lack of competence and accountability so I continued to make payments hoping I would hear from them any day.
When I received the “approved repayment plan” I celebrated thinking that I was finally free from seven years of servicer torment. The modification would allow me to immediately sell the home in which I had several buyers- and make Citi 100% whole including being paid over 15k in fees they had assessed. At the time I received the loan modification I had over 100k in equity. I would have paid CitiMortgage any amount they claimed I owed to be free of their tyrannical servicing practices.
Not trusting CitiMortgage to honor their word- I called CitiMortgage and once again confirmed that “approved” meant “approved” and that I could prepare the home for sale. The CitiMortgage agent promised me that as long as all three payments were made it was a done deal. I didn’t want any surprises down the road if they changed their minds. The home needed some updating prior to being placed on the market so I took 35k from my retirement account and went to work renovating the home top to bottom. By the time my third payment was made I had a beautifully restored home and two anxious buyers for the property. I was close to grasping the golden ring…..until CitiMortgage grasped the ring right out of my hands.
When I didn’t hear from Citimortgage I continued to make the modification payments for three more months while waiting to hear from them about the new loan terms. Unbeknownst to me the modification payments I had made were not being applied to my loan but placed in a suspense account while CitiMortgage was continuing to add on late payments and other delinquent fees. I had not agreed to this arrangement but was powerless to complain.
I finally received a letter from CitiMortgage stating my check (my fifth payment) was being returned to me with no reason provided. I knew CitiMortgage was up to something, so I checked the internet to discover that CitiMortgage was dual-tracking me and had filed to foreclose on me while compliant with the modification plan. To add further injury, I received two more offers from CitiMortgage that week offering to modify my loan! CitiMortgage did not want full payment- they wanted my house and the financial windfall that follows a successful foreclosure.
It has now been six years and the house has sat vacant since Citi revoked my modification. All the work I did has been reversed by humidity and vacancy. I no longer have any equity in the property. I sued CitiMortgage over this egregious bait and switch scheme and even provided evidence to the court that I was granted an “approved repayment plan” with no contingencies. The judge in my case, with 20 percent of his retirement in CitiMortgage, did not recuse himself but instead threw out my entire complaint and provided no reason for his decision. Not only did CitiMortgage get away with this fraud, the corrupt judge dismissed my case on summary judgement stating there was no controversy. Even when you have irrefutable evidence of fraud- if you have a biased and unethical judge you will not prevail. I reported my experience to SigTarp, the CFPB, FCC and the Office of the Comptroller- and not one agency bothered to respond to my complaint or sanction CitiMortgage for this blatant contract violation. I requested that CitiMortgage return the modification payments they fraudulently extorted from me- and of course they refused.
My situation appears to be the norm, not the exception. SigTarp reported that one out of every three homeowners in HAMP re-defaults on their payments. They suggest that the Treasury, “research and analyze whether, and to what extent, the conduct of HAMP mortgage servicers contributed to homeowners redefaulting on HAMP permanent mortgage modifications.” I can tell them from experience that examining the behaviors and motivations of the servicers would be a great place to start. I can almost guarantee in most modification cases that it isn’t the homeowner who defaults. In the first place, a homeowner who prevails in obtaining a loan modification may work diligently for years before being granted a modification and persevere against great odds! I would estimate I spent around 45 hours on the phone, faxing and following up with CitiMortgage before receiving my modification. In fact, dealing with CitiMortgage became my occupation. The homeowner who receives a modification, in most cases, has fought a long and hard battle for the modification and has no idea that the bank can refuse to honor the agreement.
To get the true story about what is going on, the Treasury could begin by sending out questionnaires to prior homeowners in HAMP that were compliant when their modifications were revoked for no other reason than the servicer wanting to take another stab at stealing the home. SIGTARP’s concerns over servicer misconduct contributing to homeowner redefaults in HAMP was revealed through the Treasury’s on-site visits to the largest seven mortgage servicers in HAMP over the last year and apparently reveal disturbing and unacceptable results, finding that 6 of 7 of the mortgage servicers had wrongfully terminated homeowners who were in “good standing”.
It doesn’t take a rocket scientist to assume that servicers are up to their same old tricks and forcing compliant homeowners out of HAMP. Servicers have no incentive to not unjustly enrich themselves at the expense of the homeowner when a successful foreclosure is more lucrative than modifying a mortgage. The usual six non-compliant culprits are named in the report:
WRONGFUL TERMINATIONS OF HOMEOWNERS FROM HAMP BY SERVICERS:
Q4 2014 TO Q3 2015
Servicer Wrongful Termination of Homeowner From HAMP
Bank of America, N.A. X
CitiMortgage Inc X
JPMorgan Chase Bank, N.A. X
Nationstar Mortgage LLC X
Ocwen Loan Servicing, LLC X
Select Portfolio Servicing, Inc.
Wells Fargo Bank, N.A. X
According to SIGTARP, homeowners who make their modified mortgage payments on time, or who do not fall three months behind on those payments are entitled to remain in HAMP. However, the Treasury’s results found that, within the last year, Bank of America,CitiMortgage, JP Morgan Chase, Nationstar, Ocwen and Wells Fargo all claimed that homeowners had redefaulted out of HAMP by missing three payments when, in reality, they had not.
These six mortgage servicers account for 74% of non-GSE HAMP modifications funded by TARP since the start of the program. Upon further reading, and despite the fact that the Treasury has done nothing to stop this misconduct, the servicers are engaging in a process of holding the homeowner’s payments in suspense accounts (so they can continue accruing late fees and other delinquent charges), reversing and reapplying the homeowner’s payments improperly and terminating homeowners who have not defaulted on the required three payments.
This misconduct is also probably much larger in scale than it appears because the Treasury only samples 100 redefaulted homeowners per servicer each quarter. It is possible that the number of homeowners impacted is much, much larger. This has been going on since the inception of the program and the Treasury’s response over time has been anemic and unresponsive. The servicers appear to have an understanding that if they don’t comply there is no consequence other than a little bad publicity (as if a little more bad publicity would impact them at this point).
The potential profit of a fraudulent foreclosure is incentive enough to kick compliant homeowners out of the HAMP program. It should be known that many of the servicers making offers to modify do not have legal standing to make an offer to modify the loan in the first place and are simply engaging in a process to get the homeowner further into default.
In my particular case, all I wanted was to modify my mortgage, sell my home, and go forward with my life. CitiMortgage did NOT want payment- they WANTED the HOME and used modification as a tool to obtain this goal. A modification is nothing short of a tool of deception used by servicers to steal a home. Servicers use modification for these purposes:
1. Intimidate the unsophisticated or vulnerable Homeowner- Create Fear and Confusion by processes of circular phone transfers, lost documents, false claims, conflicting messages and blatant lies.
2. Time Destruction- Time spent in modification compromises other available options like refinancing, a short sale or hiring an attorney. A consumer’s options diminish as time goes by. It is to the bank’s benefit to not modify the loan but to paint the homeowner into a corner.
3. Equity Erosion- Every month while in a modification the equity in the home is eroded by late fees and other charges the consumer is not advised about in advance.
4. Payment Hostage- The servicer retains the monthly modification payment in a suspense account. These funds then cannot be used for a more beneficial purpose like retaining an attorney or refinancing. The consumer is not told that the payment will not be applied to their mortgage or if the modification fails that the payments will not be returned.
5. Dual-Tracking- A homeowner in the process of modifying their mortgage or who has an approved modification may be subsequently foreclosed upon in violation of law.
6. Government Kickbacks- Servicers who engage in the modification process receive compensation for each modification attempt and successful modification. Servicers are accepting government payments (from tax payers) only to sabotage modifications.
The time has come for a full investigation into the behavior of loan servicers. Not only do servicers make offers to modify loans they have no legal right to modify, but they engage in fraudulent practices that are not in the best interest of the homeowner, investor or community. This article won’t get into the fact that servicers lie about their relationship to the loan, the balance owed and need to be heavily fined and sanctioned for forging documents, filing false affidavits and other criminal acts. The bottom line is that a servicer is incentivized to lie, to cheat and to steal by a lack of governmental oversight and by the potential windfall of profits that occur upon a successful foreclosure (including insurance, “servicer advances” and other compensation). The bank has bet your mortgage will fail, and you can bet they will resort to every trick in the book to take your home including the use of faux modifications.
It is ironic that two months ago I received a letter from CitiMortgage offering to modify again. This is despite the fact that the note and mortgage were rescinded under TILA. I’m not sure what CitiMortgage thinks they are going to modify now that the note and mortgage are void by operation of law- but why would I expect rogue servicer CitiMortgage to comply with any state or federal law?
Advice: Your servicer is not your friend and will act only in their best interest.
I have attached copies of my “approved repayment plan” as evidence of the modification agreement.
If you would like to share your modification story with us please email us at: email@example.com. We would like to hear about your experiences.