I have heard this story directly from a few folks in Nevada. I know someone in NY who has a similar story. But when I heard from yet another person in Florida this morning I said, “There must be something to this”. My sample of information is too small. I want to know if this is a coincidence or is there something bigger and nefarious afoot.
There has been (from my narrow perspective) a flood of approved loan mods in just the last few weeks. People who were on the edge and not paying a mortgage get a letter in the mail that says their application has been approved. After weeks and months of hanging on a phone and waiting for an axe to drop some relief arrives.
Nothing particularly unusual about that. Mods are granted all the time. But I was struck by the timing. The foreclosure story is exploding around the banks. It is not possible to see where this will end but it is a certainty that it will cost the banks big time.
What might a banker do if he was sitting on a pile of defaulted mortgages and now the traditional route of foreclosure was blocked? Adding to the problems of the bankers is that there is no assurance that they even have a valid claim to foreclose given that so much of the paperwork is tainted.
One possible response would be to get all troubled borrowers to reaffirm their debt, the second is to get the trouble borrowers back to paying something on the mortgage, even if it were a fraction of what was formerly owed on a monthly basis. A loan modification would achieve both results. When a borrower signs up for a loan mod they sign new papers. A portion of this process will re-establish any loan balance that is due. The language in the mod could have new foreclosure terms that eliminate the banker’s problem with past tainted documentation. Once a borrower makes a few months of new lowered payments they are, in effect, confirming their acceptance of the new terms.
Most Mods go bust in six months. So little is accomplished from the lenders perspective. But what if the lenders motivation for doing a Mod was not to get a borrower to a loan balance and monthly nut that they could pay, but rather the motivation was to circumvent the foreclosure trap the lenders are in? A Mod could legally resolve the problems.
The story I have been hearing is that tens of thousands of Mod letters have been sent by servicers in the past few weeks. Anyone who had an application pending is all of sudden getting the happy news in the mail.
Question to the audience: Has anyone else heard or seen evidence of this?
If this were to be true is would be a very big slap in the face of the banks. For years they have been fighting off Mods. But when the tables turn on them due the unforeseen explosion and chaos in foreclosure the banks turn on a dime and go into mass Mod mode. Should that be the case it would prove (once again) that the banks will do anything to screw their customers. The mod is just a vehicle to perfect the mortgage lien.
Bruce Krasting
bkrasting@gmail.com
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Bruce I have a friend in the Northeast who had been paying half the mortgage payment for over a year. I suggested to him last Winter that he apply for a modification under HAMP, and he did so, but he heard nothing for over 7 months until mid August when it was suddenly approved, but this was after he had lost his job. I don't know if the bank/servicer knew at the time he was unemployed (he had a job when he first applied), but I have to believe they did know.
ReplyDeleteWhen I see him next time, I will ask if the modification is in place and signed. There will have to be a foreclosure in this case eventually, even with a modification- or a short sale. If he is willing, I will look at the documents to see just what they say about foreclosure terms. It wouldn't surprise me one bit if your suspicion is correct.
Yancy, Mid August. Not sure this is what I am looking for. I am looking for a big uptick in the Mod offers from say, 9/15 onward. Prior to that the Foreclosure gate was not news??
ReplyDeleteIt's all true. I, of all people, received an application from JP Morgan Chase for a modification. This came out of the blue from a lawyer for Chase.
ReplyDeleteI have been in the foreclosure process for months. I was supposed to go to a referee conference at the end of Oct (pretty much the last step in NY), but that and the foreclosure action were withdrawn by Chase a week ago due to foreclosure gate.
So, much to my surprise the mod app arrived in the mail yesterday. Chase never really worked with me in the past. I tried HAMP earlier in the year, made payments but by month three they demanded more paperwork that I had already submitted. I decided they weren't serious about the HAMP mod, didn't comply.They eventually denied me a HAMP modification and demanded I pay the balance owed (160,000) and that no other "assistance" was available.
I should add, that I also received a call from Chase collections yesterday. They said they wanted to really help and that I rush the mod app to them as soon as I could. I blasted the collection agent and told her that they should have done this a year ago and that I saw right thru their effort to get me to reaffirm the debt (originally a WAMU loan).
I was about to file for Ch 13. Now I will get together with my lawyer and regroup. I will still likely file the ch 13, but I will use it to extract a tough deal out of Chase or I will go ch7 and rent. I've never wanted a "free house" or to be a squatter. I only wanted to work something out and to go on with my life. Maybe I will drag this out longer and let 'em sweat for being RICO candidates.
I became disabled after severe illness and lost my 250k+ job. I was never late with a mortgage payment from 1992 to 2008. These bankers are slime. IF you wish to repost this go ahead.
It makes sense but, as I noted in an earlier comment, this problem is not new only public awareness of it. The USG HAD to know about the issue through its regulation of the whole mortgage securitization industry, thus the incredible effort to not just modify existing loans but to get as many loans as possible refinanced.
ReplyDelete100+% LTV value loan refis through the GSE's ( announced in July 2009 e.g. served to not only shore up underwater loans but also to remove the foreclosure issue then just beginning to appear in court cases.
Sure, the banks are sleazy, but if the foreclosure problem gets them to do loan mods isn't that the best way to handle this problem? Maybe something good can come out of this!
ReplyDeleteThese bankers are slime.
ReplyDeleteWhy is that? Because they ask, or even insist, that you fulfill the terms of the contract, i.e. that you pay mortgage?
Question: Did you have a disability insurance policy? One that would pay your mortgage in the event of illness/disability? I guess not. Why not? Because you wanted to save money? It seems you earned enough to pay for such a policy.
So I guess that's a risk you took that did not work out in your favor.
I only wanted to work something out and to go on with my life.
Do you mean you wanted to pay less? Isn't 'working something out' a euphemism for paying less?
Because you were in foreclosure, I assume you were not paying your mortgage, and therefore were -- to use your word -- 'squatting'. Were you paying anything?
Apparently you've had some hard luck, brought about, or compounded by, illness. Yet it also seems you were, at one time, very very well paid.
Obviously, I suppose a mod would be in your best interest, perhaps also the bank's.
Nonetheless, I know many responsible renters -- who'd be thrown out by law enforcement without any media mention or attention whatsoever -- who are so angry at all of this they'd like to see both sides hang.
They are slime because they have trampled over the rule of law and have lied in court in order to push foreclosures through. Congress will probably pass a bill in the lame duck session that will excuse the past fraud committed by banks. so much for the rule of law. Otherwise you are right to question me and the errors that I have made. It is a terrible situation.
ReplyDelete"Congress will probably pass a bill in the lame duck session that will excuse the past fraud committed by banks"
ReplyDeleteThis I highly doubt. I think something along the lines of what Krugman proposes will be the end game here: "For example, the Center for American Progress has proposed giving mortgage counselors and other public entities the power to modify troubled loans directly, with their judgment standing unless appealed by the mortgage servicer. This would do a lot to clarify matters and help extract us from the morass".
But there is this: On Fox News Sunday, US Rep Debbie Wasserman-Schultz (D-FL) went on to advocate a complete ban on foreclosures on a family's primary residence. Bank of America has already halted all foreclosures; Ally, JPM and Wells have halted it in about half the states.
for whatever it's worth--my neighbor has been dealing w/the incompetent folks of the HAMP for 11 mo.
ReplyDeletethen all of the sudden they were approved. except the catch on this one was to get the "wet ink" ! once received they retracted the offer & denied them the SAME day they received their signed docs!
What I posted on clusterstock:
ReplyDeleteSounds pretty reasonable, and not nefarious, to me. Clearly, there is some question as to whether the banks have crossed all the t's and dotted the i's, but not that there are a lot of people who are in default on their mortgages. Either converting the mortgage into one which can be reasonably repaid by the homeowner, or straightening up the paperwork so that the foreclosure process can go forward cleanly -- both are beneficial to the financial system at this time.
Well forclosure gate certainly is not working for my daughter and her mortage holder is none other than BoA who is the facilitator of forclosure gate. Today they flat out denied her a loan modification for the 2nd time. She lost her job in May 2010, is receiving unemployment, has sent in mounds of documentation, was instructed by BoA in June to submit documents for a "trial" loan mod. She followed all the directions and was denied and now denied on appeal. As a first time homeowner, she is scared and worried.
ReplyDelete