Loan Modification Misinformation or Lies… I Just Can’t Take Much More of This
It’s coming up on the end of 2014, at least six years since the financial and resulting foreclosure crisis began, and I have to say that it’s really quite shocking how far we haven’t come. But this time I’m not just talking about the servicers… or the scammers… I’m talking about the “helpers” too, whether law firms or HUD counselors… or any in between.
When HAMP started in June of 2009, it was by far the worst government response to anything that I’d ever seen, or could have imagined was possible. It was literally chaos, and the homeowners who got caught up in it, I would imagine, will never be exactly the same.
I mean, the president came on television in late February of that year, and described his Making Home Affordable Program, and among other things, he said there’d be a government help line to call, which never really did much of anything… and then the message that was echoed over and over again: “Just call your bank directly, or call a HUD counselor.”
Of course, the president failed to mention just who would or wouldn’t qualify, or how such decisions would be made. And he made it sound as if there was some sort of quid pro quo in play… the taxpayers had bailed out the banks, and now the banks would be asked to do the same sort of thing for homeowners who needed help saving their homes from foreclosure.
I knew it had no chance of working the moment I heard his description of which homeowners the program was designed to help… it was only for the “responsible” homeowners.
The moment I heard him say the words, “responsible homeowners,” I knew we were doomed, and I wrote as much in the article I posted immediately following his historic speech, “I’m sorry Mr. President, That’s Just Not Enough.”
Which homeowners would be deemed “irresponsible,” I had to wonder. Wasn’t buying a home the “responsible” thing to do? I know that’s why I bought one.
So, as soon as HAMP launched the pandemonium started. No one was prepared for the millions of homeowners that called claiming to need help with their mortgages. Servicers had nothing in place to handle the volume or the crisis. Loans, it helps to remember, weren’t written so they could be written down when in default.
No servicer had ever modified a loan before… few homeowners had ever even contacted their servicers before… and now there were hundreds of thousands calling every day because the president had told them that they could get their loans modified, and if anything, he had made it sound like it would be a relatively easy thing to do.
The servicing machine, however, had been built to send out payment coupons, collect and post payments, and when someone didn’t make their payments, foreclose… and as a low margin business, they outsourced everything they could, including the foreclosures, and the law firms that they outsourced foreclosures to were not used to having anyone oversee, much less question what they did.
You have to remember back before this crisis, very few people ever went into foreclosure because just about everyone had equity. So, when a homeowner hit a bump in the road, they could take out a second or a HELOC, and if things got really bad, they could sell the house… but none of those things were available anymore. Now, if you got laid off, became ill or injured, or got divorced… and your house was underwater at the time… there was no borrowing your way through the problem… there was nowhere else to go but into foreclosure.
Add to that the teaser rates, negative amortization loans, option ARMs, predatory lending in general, and of course, the normal people that simply planned to refinance after the first few years and now couldn’t… and there was an enormous tragedy in the making.
So, for several years I was highly critical of the way servicers and our government were handling anything and everything. It seemed to me like they could do nothing right, because everything they did failed miserably. And all the while, homeowners were being absolutely tortured by a process that continued to make no sense to anyone.
And throughout the whole terrible affair, all the government had to say was, “call you bank directly, or call a HUD counselor.”
Finally, we had the National Mortgage Settlement and not that it was so impressive by itself, but there was no question about it… it was a turning point. Within six months of the settlement, servicers started improving when it came to modifying loans. Not dramatically at first, but starting in 2012 and certainly throughout 2013, while getting a loan modified was still absolutely no fun… it could be done.
Homeowners weren’t any happier about the situation, but you could see the numbers improving at places like Bank of America and Ocwen, Chase and even One West… if a borrower’s financials were right, loans were getting modified in many instances. Maybe not fast enough, and maybe not the way homeowners expected or deserved, but there was no denying it… a lot more people were getting loans modified than in any past years.
In the middle of 2013, a senior executive at Bank of America said to me, “But Martin, we’re a lot better today than we ever were in the past.” And I replied, “That’s true, you’re better… but homeowners are much worse.”
After more than five years covering an unprecedented and growing crisis from a front row seat, I could see it more and more clearly as each year passed, and it didn’t exactly make me popular among many in the “fight foreclosure” crowd. They didn’t want to hear that servicers were getting better, they were the definition of damaged goods, and they would accept nothing but bloody vengeance at this point.
And the thing was… I wasn’t sure I could blame them for the way they felt.
The truth of the matter is that this crisis never had a chance. It started badly, and got worse… and by the time it was starting to improve, too much harm had already been done and many weren’t interested in learning anything new.
The problem I never saw coming…
At one point over the last five years, I would have told you that the crisis couldn’t possibly be worse than it already was, but I would have been wrong… very wrong. And what happened next was the only way it could have happened… it became difficult or impossible to distinguish the scammers from the helpers, and after that no one knew what to believe.
Not only that, but in addition, the scammers got much better at their trade, and much harder to catch or police. Even when they were shut down in one state, they could simply move into another… and start up their phone room once again.
The money was irresistible, both in terms of the amounts available, and the ease with which those amounts could be obtained. Homeowners were increasingly desperate, and a clever sales pitch delivered with the right buzz words and promises of a legal victory and perhaps a free house, led to mountains of cash flooding in from the day one picked up the phone.
At five grand a pop, and 50 states worth of homeowners to call, it was easy to have $100,000 days, and that’s real money to anyone’s way of thinking. And the chances of getting caught before millions were pocketed were… remote.
By the time the authorities would do anything to prevent you from operating, you’d have taken millions from homeowners, and even then, it was hard to pin the whole thing on any one person… to this day, very few have gone to jail.
It’s a also a crime that largely goes unreported. Homeowners are ashamed when they’re at risk of foreclosure, and telling someone that you got ripped off on top of that was just more than most were willing to do. Husbands hid losses in their company’s books, rather than admit they had bought the equivalent of magic beans for ten grand.
But, then it got worse… inconceivably, perhaps… but it did and it remains so to this day. And I’m so damn tired of it… so tired I can barely stand it. Would you like a glimpse into my days and nights? Probably not, but I’m going to give you one anyway.
A week in disgust…
- This past week, one homeowner told me that she had called a HUD counseling agency and was told that her first step should be to file a complaint with the CFPB, because… “Nothing ever happens without a complaint being filed?”What a crock of crap that advice is. Over this summer, I personally saw over 30 loans get modified and none involved complaints of any kind. I’m not saying that complaining never has a role here, but it’s certainly the exception, not the rule.
- Several new fake law firms are telemarketing, and a couple of hybrid firms that claim to “work with attorneys,” are also marketing from coast to coast. Hasn’t everyone learned that law firms don’t solicit you during dinner, and chances are that “working with attorneys,” is another phrase for “worthless scam.”
- Even with countless examples of how difficult it is to prevail in court, I still hear from at least one homeowner a week who has gone straight into some sort of litigation before even attempting to get his or her loan modified. Why this is happening today I just don’t know, but it’s just plain dumb.
- I also can’t seem to make it through an entire week without hearing from at least one homeowner who has followed a terrible path only to discover the hard way that perhaps they should have listened to me instead of whomever else. Now, on the eve of their eviction, they want to know what I can do to help. It’s heartbreaking and it should not happen.
- Too many homeowners continue to avoid contacting their servicers until the last minute. I understand why this is the case… I don’t call my bank when I should either. But, if you’re going to take that sort of tack, for God’s sake save money… as much as you possibly can. Garage sales… I’d check yes. Babysitting… I’m for it. Don’t wait until the last minute and then have nothing to show for it.
- Far too many “helpers” are spreading misinformation about all sorts of things. I think many are sincerely trying to help, but you’re not doing anyone any favors to tell someone something of which you’re not 100 percent certain. Just because you did a dance last month and then it rained… does not necessarily mean it was a rain dance.
- Filing a lawsuit does not get your loan modified sooner than trying it on your own… in fact, the opposite is true. Once you hire a lawyer, the servicer is out of the game and you’ll be going up against a law firm who has nothing better to do than drag you through the courts for years, if you’ll let them. Litigation should be your last resort, not your first move.I cannot count the number of homeowners who I have talked to that have been in some sort of litigation for several years, and once they drop their case, see their loans modified in a matter of weeks. Remember: Servicers don’t care if you sue. They have no skin in the game. Suing just means less work for them.
- I know how stressful the whole foreclosure experience can be, but it would go a lot smoother if everyone would stop believing what we want to hear, and started doing more reading and more researching. I know, it’s hard work, but if you’re going to prevail, you’re going to have to be smart about what you do.Just because one person says something, doesn’t make it so… let’s double and triple check everything. Let’s ask to talk to others who have succeeded following the advice you’re being given. And and not just one or two… how about six or even ten. If the person you’re talking to is legit, they won’t mind you wanting to verify whatever he or she has said.
Here are two winners from last week’s Basket of B.S…
A. “At American Capital Revitalization Group, not only can we put together your financial package but we can guarantee to have you approved and living with a lower monthly mortgage payment.”
B. And this from the Nonprofit Alliance of Consumer Advocates, “a legal clinic.” (I suppose that would be as opposed to an illegal one.) Be sure not to visit them at www.nacalaw.com:
“An unusually high percentage of home loans originated from 2004 thru early 2009 contain errors, mistakes, violations, misrepresentations or blatant fraud that make the rescission of the original contract a possibility. Loan Rescission provides the homeowner with a clean exit from the loan without additional damage to their credit and the possibility of removing any past derogatory credit reporting concerning the subject mortgage loan including but not limited to foreclosure and prior late payments. While rarely offered by the lender voluntarily, a skilled Attorney conceding to loan rescission to in lieu of the high cost of the same inevitable loan rescission decision from Judge or Jury would prove more cost effective advice to the lenders by their Attorney.”
Okay, boys and girls… I can’t take much more of this crap.
I try to give everyone the benefit of the doubt… but enough is enough… this stuff is all worthless crap and those who sell it… know it. But that’s not even the worst part.
What worse is that it will set you on a path to losing your home, because by the time you realize that you’ve bought into someone’s B.S. it will very likely be too late to do anything to save your home.
I understand… I really do. It’s become almost impossible for most people to distinguish between someone who knows what he or she is talking about, and someone who, although perhaps well meaning, just doesn’t know enough about the subject matter. Maybe they’ve had some experience themselves, or maybe they’ve read enough to sound knowledgeable, but neither of those things is enough to offer advice to homeowners in all situations, I’m afraid.
It’s interesting because this is the same sort of challenge faced by servicers. You see, the reality is that every single loan modification is unique… like a snowflake… no two are alike. They each have entirely different sets of facts… different investors, different trusts, different borrower financials, different amounts in arrears and interest rates, and they occur at different times with different people handling them.
As a result, any one perspective is just not enough to conclude anything about the process overall. On any given day, for example, I’ll hear from one person saying that Ocwen is impossible to deal with, followed by someone else saying how wonderful Ocwen is. A lawyer in Massachusetts will tell me how Bank of America is doing a lot of principal reductions, and the next day I’ll hear from another that disagrees completely.
When I started writing about the financial and foreclosure crises back in 2008, I put my email address and even my phone number online because I wanted homeowners to be able to ask questions if they didn’t understand something and as a result, I’ve heard from tens of thousands of people from all over the country for over five years now. Its given me a unique vantage point from which to view the crisis, allowing me to see when something is a trend, and when it’s not.
I also think that I’m the only writer that’s covered the crisis from all sides.
I’ve spent years on the homeowner and foreclosure defense attorney sides, but I’ve also worked with a couple of state legislatures, interviewed many of those that were part of the federal government when it all happened, and finally I’ve gone to visit Ocwen, Bank of America and Impac, toured their operations, interviewed their top executives, and come to understand their perspectives as well.
As I’ve been saying since 2009, we’re in a river, not a lake. The water we’re standing in is changing all the time. So, whatever happened yesterday is quite possibly not relevant tomorrow. It’s somewhere between difficult and impossible for attorneys and others to keep up with what’s happening in the various courts or to know what’s going on inside various servicers, so if you’re just a casual observer, there’s just no chance whatsoever of keeping up.
But regardless, the answer is to get your loan modified… period. There shouldn’t be any question about that at this point. Keep trying that and don’t give up. Be relentless… and only when that has failed completely, should you consider turning to the courts. And that’s when you need a lawyer because for 99 percent of homeowners, representing yourself is not a path to success.
There’s no debating any of that… it is what it is. You’re going to have to learn quite a few things to succeed, however. Reading will help keep you sane and improve your chances of success, but you’ll also learn more from the experience than you ever wanted to learn about a subject you never even knew existed.
- One long time reader of Mandelman Matters showed up at our annual Christmas party two years and I’ll never forget his story. He applied for a loan modification seven times with One West Bank, filed bankruptcy four times, hired three different lawyers to file lawsuits, and after all of that… he not only got approved for a loan modification, but it came with a $250,000 principal reduction.
- Just two weeks ago, I had a homeowner that had been denied three times in a row by Bayview Servicing. I was able to get him some help re-doing his numbers, he reapplied and was approved in 13 days, including a principal reduction to market value.
- This summer I was able to help a borrower in Kentucky who really didn’t have enough income get a principal deferment of $300,000 at zero percent interest for 30 years from SPS.
- And Bank of America continues to impress me as to their willingness to modify even in situations that don’t fit into the expected formulas.
And yet every single day, I wake up to several emails from homeowners around the country telling me horror stories of how they’ve been unable to get their loans modified, some of them for years. Most of the time I can ask them a few questions and determine what they’ve been doing to get that result, but there are still too many times when I can’t.
It’s been six years since this crisis began, and it’s shocking how far we haven’t come as far as loan modifications are concerned. But, at this point it’s not the servicers that are causing most of the problems… it’s those that have made a business out of telling people they have answers… when they don’t.
It’s making the crisis much worse, and it’s making me completely insane… battling servicers was easy compared to the enemy we face today.
It’s up to us to stop it. We have to be vigilant about asking questions, demanding answers and doing the hard work to stamp out misinformation. If we don’t… we will all pay the price for our complacency, and we will have no one but ourselves to blame.
And yes… if you need help, or have questions about getting your loan modified, especially if you’re with Bank of America or Ocwen, but others as well… you can contact me by sending an email to the address below.
As long as I’m here, if I can help, I certainly will.