One of my nice readers submitted the following question in the comments section of my recent post about what a scam the banks’ trial mortgage modifications are. I hadn’t covered the issue of bank-solicited mods in that piece, so I thought this reader’s question and my answer needed to be featured in an actual post for all those people who couldn’t ever imagine their banks blatantly trying to set them up to lose their homes.
Helpme in Jersey writes: “I need help. We just received the packet of information from Wells Fargo for our trial modification. I have until next Friday to make my decision. The payment is something we can afford but I am worried that this is a scam. I want to add that I had not contacted them to see if they would modify our loan. They sent us this paperwork.”
Here’s my answer, something to think long and hard about if you’re in a similar situation:
Be very careful “Helpme in Jersey.” Don’t agree to anything that you don’t have in writing signed by someone from Wells Fargo. And ask lots and lots of questions before you wade into the mortgage mod quagmire, especially if you are current on your mortgage and can afford the payments you have.
Be aware that the banks play a nasty little game where they solicit you for a modification – the wouldn’t it be nice if we just came along and gave you a lower payment come-on – as a way to lure you into their bottomless foreclosure pit.
They start with a perfectly rational-sounding trial modification and instruct you to pay an amount lower than your contracted mortgage payment for three months (or sometimes longer.) What they don’t tell people (or they lie about) is that during those three months they will report you to the credit agencies as delinquent because you aren’t paying the amount your mortgage contract calls for, even though they told you to pay that amount. Oh, and the trial period payments generally ARE NOT applied to your mortgage; they go into some secret account never to be seen again.
Even if you make all the “trial mod” payments on time and jump through any other hoops, such as sending them reams of paperwork one or many times, chances are at the end of the trial period they’ll inform you that for some made-up and usually vague reason that you haven’t qualified for a permanent loan modification. At that time they’ll demand a balloon payment including the unpaid amount from the trial period (yes, even though you paid the amount they told you to pay) and any fees they might have made up to tack on. If you can’t come up with this balloon payment in a relatively short time, you get thrown into foreclosure because you are, at that point, technically three months delinquent on your mortgage.
Now you have to fight off their relentless foreclosure machine, which seems to move forward only, no reverse. Once they have their sights on you, it’s very difficult to get them turned around. And, because your credit has taken a hit, you might not even be able to refinance somewhere else to escape.
I urge you to speak to an experienced housing counselor or foreclosure attorney – someone actually in the trenches – before you make any changes to your mortgage.
Did I miss anything in my advice to Helpme in Jersey? Anyone have any other ideas how to keep this person from falling prey to Wells Fargo?