(LoanSafe.org) — There are bad loan modifications out there, and the purpose of this article is to show why some are better than others and to seek out any bad mortgage loan modifications to try to fix the defects before they cause more distress to homeowners, investors, and communities all across America.
The intended audience is anyone interested in learning more about loan modifications and why they could be considered bad versus being good and what can be done to correct a bad modification.
The example in this case is a real world case of a modification granted by Wells Fargo Bank, N.A on behalf of investor HSBC Bank USA, National Association as Trustee for Wells Fargo Asset Securities Corporation, Mortgage Pass-Through Certificates Series 2006-AR12.
The borrower was asked to sign this modification back on February 26, 2010 on a loan amount of $721,478.83 with a capitalized past due amount of $7,879.33.
The existing rate was dropped from 6.5% to 4.375% for a term of 12 months.
The payment dropped from $3,865.33 to $2,601.66 during this period of time due to the interest rate reduction.
The borrower is not sure if she was approved for HAMP or not at the time and at this point has given up hope at correcting this bad loan modification.
She made her payments on time for a year at $2,601.66 and when she went to re-apply for help because of the scheduled payment increase, she was told that she could not get another modification as the investor only allowed one modification through the life of the loan.
The payment for the borrower jumped 48.57% from the payment she was making on time and this caused her to miss her payments again.
She was told when she accepted her modification that after a year, she could re-apply if she could not afford the payment adjustment since the payment shock was going to be so high as to put her debt to income ratio above 51% of the income the servicer had verified.
She signed a “Notice of No Oral Agreements” which she obviously did not understand would make whatever she was told, no longer valid.
In any case, this was a bad loan modification for the investor, the borrower, the community, but good for all those who would benefit from another home sale or loan origination, as well as the mortgage servicer because of all of the revenue generated in servicing a delinquent loan.
When writing about bad loan modifications, the word, predatory came to mind, meaning “of, pertaining to, or characterized by plunder, pillage, robbery, or exploitation: predatory tactics” per www.dictionary.com.
Why would Wells Fargo Bank, N.A allow this to occur and not at least seek out the investor and ask for a long term solution that would allow the borrower to retain their home?
One possible reason could be that it would not make financial sense since now, the home prices have gone up enough to warrant liquidation of the property.
Another possible issue is the amount that is past due is not correct.
The servicer reports to one credit bureau that the amount past due is $65,000 and to the other two bureaus, $127,000.
These kind bad loan modifications cause people to give up hope and walk away from their home or list it for sale.
If you think you have a bad loan modification, we would like to hear from you for a research project that we started in 2012.
We are looking for bad loan modifications that meet the following parameters listed below.
You must be able to provide the full permanent Loan Modification Agreement for any of the following banks or lenders and dates:
Agreements must be made after February 8th, 2012 for Bank of America, Wells Fargo, Citimortgage, JP Morgan Chase, GMAC Mortgage
Any modifications that you have received on any date from Ocwen, Saxon, Litton, Nationstar, Select Porfolio Servicing, One West Bank/Indymac Bank, US Bank, AHMSI, Homeward Residential, or Green Tree Servicing.
If you are in the states of Texas, Massachusetts, or New York, these are the most important for our research team.
Any “violations” that are found in the permanent Loan Modification Agreement that could very well be extremely material problems down the road like in the example above, will be noticed to you so that you may know what next steps are available to fix these defects that are a feature of bad loan modifications.
There is no cost or obligation for this review, it is complimentary, and you will at least know what potential bombs may be waiting in the future and we get one more case of a bad modification that can hopefully be corrected before it forces you to make a decision that you do not want to make or are forced to make.
Please forward these documents by email to firstname.lastname@example.org and try to keep the file size below 5MB and also include subject line which servicer the agreement you have is for.
Include your name and contact information and preferred time you can be reached to go over the results.
Only include the Permanent Loan Modification Agreement, all pages.
Time for reviews usually take 1 to 5 business days and are done by an expert that is working on a research project for several different national homeowner and investor groups.
Do not include any other documents in your email other than the permanent Loan Modification Agreement.