By the Lending Lies Team
Mortgage Servicing should be more accurately called Mortgage Disservicing. The loan servicing industry is a rigged system that engages in a myriad of fraudulent tactics to ensure that homeowners fall behind on their mortgages so that a default becomes imminent. There is something very wrong with a service that operates with a conflict of interest from day one- and that is to find a way to engineer a very profitable loan default. Natural disasters present another opportunity for predatory loan servicers to prey on the vulnerabilities of unsuspecting homeowners.
Covert tactics by servicers routinely include misapplying payments, not applying payments in a timely manner so that late payments and other charges can be assessed, and providing blatantly erroneous information in order to confuse the homeowner (e.g. If you miss three payments we can modify your loan). Loan servicers rely on the homeowner’s lack of power to correct any servicing issues that occur over the life of a loan.
When modifying a loan, documents are routinely lost even when mail tracking shows the items were delivered, documents are requested repeatedly, and the homeowner is transferred from department to department and after hours on the phone. Just when a resolution appears near, the phone call is disconnected. The homeowner will never be able to contact the same customer service agent again, and will be forced to begin anew.
Loan servicers are not in the business of acting on behalf of investors of the trust, but act on behalf of their own profit generating tactics. A foreclosure can mean thousands and thousands of dollars in profit, while a monthly servicing fee generates less than $1.00 a month per loan. Now people in flood ravaged Louisiana are finding that their loan servicers are utilizing a natural disaster to engineer a foreclosure.
While people in Louisiana are still attempting to salvage personal belongings and restore their flooded homes, the banks are looking at this disaster as an opportunity.
Cathleen Dell and her husband William live in Hammond, Louisiana. August rains decimated their home, and they were forced to live with family friends until the waters receded. The home has been stripped bare and is drying out but the repair bills are causing financial distress. The Dell’s purchased a home in an area that was not designated as in a flood zone, so they chose not to purchase coverage. When the flood waters came they found themselves without coverage and water half way up the walls.
Cathleen Dell is a teacher and her husband William is retired from the Army. Although the Federal Emergency Management Agency is helping the citizens of Hammond a little it is not enough for most homeowners with limited means. The Dell’s reached out to their servicer to apply for a forbearance on their mortgage so they could make repairs on the home.
However, their mortgage servicer made an offer that may have ultimately led to the foreclosure of their home. The servicer was willing to do a forbearance that required a large balloon payment including all fees at the end. Dell thought she was signing up to have her payments suspended for 90 days and repaid at the end of her loan.
“Our house payment is basically is almost $1,300 a month,” Cathleen said. “So, there was no way that we were going to be able to afford a $10,000 house note on March 1st.”
Cathleen wants other homeowners to read their paperwork carefully before agreeing to any new terms. The Dell’s ultimately had to turn down the forebearance because there is no way they would have the ability to pay the 10k note when it became due in 9 months.
The servicer has all the control. People often fail to ask when the payment will need to be made, how much interest will accrue and what the late fees will be. When the payment becomes due, they often find that the forbearance payment exceeds their ability to repay and they end up losing their home. Likely, the servicer is planning on a desperate homeowner agreeing to terms the servicer knows they will likely not be able to satisfy.
According to HUD, there may be special relief to homeowners who have government insured loans because of a natural disaster. However, get everything in writing and do not agree to verbal contracts with a loan servicer.
A government backed mortgage protects lenders against losses. These loans include an FHA or VA loan, which provides certain relief options after a natural disaster. A conventional (regular) loan may provide options; however, these may differ based on the lender.
For government insured loans, servicers can evaluate your loan for mitigation assistance to help you keep your home. However, be very cautious when dealing with a loan servicer who will ensure that they get the best deal out of the agreement- they are likely not providing help out of the goodness of their hearts- but in hopes that a financially stressed homeowner will not be able to repay.
Also, lenders may execute a loan modification, temporarily suspend mortgage payments up to six months and waive late charges or other options to help the homeowner- but you MUST get this in writing. In fact, it is preferable to engage an attorney to review the paperwork and keep the servicer ‘honest’.
If homeowners are not satisfied with the options provided by the lender, they are encouraged to contact HUD’s National Servicing Center at 800-569-4287. In addition, they can also contact FEMA for financial assistance. With that said, even when dealing with governmental entities- get everything in writing because you may need this evidence in the future to defend your position in a court of law.
Filed under: foreclosure