Why Your Mortgage Mod Was Really Denied

“Three years after the foreclosure crisis began, the process to apply for a loan modification remains a bureaucratic nightmare that is complicating
the housing recovery …”

An excellent Reuters article detailing the ongoing dysfunction of the mortgage modification programs does a pretty good job of describing the nonsense the banks put people through in what should be a relatively simple, straightforward process. Here’s what one homeowner went through when seeking a loan modification after her adjustable-rate mortgage payment went up, but before she had even missed a payment:

“First she provided documents without getting any response,”

“… then she was denied by her servicer for not providing documents it never actually asked for.”

“One part of the bank appealed that decision and approved her for a trial modification,”

while “another part denied her again – twice – providing two new reasons in part based on inaccurate calculations.”

Then, when contacted by a third party,”a bank spokesman said she was unable to qualify under “imminent default provisions,” a third reason.”

Later the bank begins to start to threaten her, sending a letter stating it is going to “accelerate foreclosure proceedings, despite her perfect payment record and the letter itself saying the bank owed her $281.01.”

Yikes! If you’re not involved in this process with a bank, I think it’s very hard to fathom the breadth and depth of the banks’ perfidy —¬† the ridiculous lengths to which they will go to justify a denial and the sheer number of lies they tell to support these trumped-up denials.

I’ve gotten fake denials — twice told I had violated the terms of a trial modification I was never in and once denied like the woman above for not sending documents that I was never asked to send. Those are all about confusing and frustrating people, discouraging people from pursuing a modification. I know at least one person who believed a denial letter that actually had nothing to do with her case and gave up, letting her bank foreclose without a fight.

The Reuters reporters documented another disturbing tendency of the banks: falsifying numbers in order to engineer a loan mod denial.

One homeowner’s loan servicer “overvalued his house by more than $100,000 in rejecting a modification.”

“Once he was able to convince [the bank] of that mistake, it rejected him again, dropping his monthly income by almost $4,000 … even though his actual income had not changed.”

Another common practice among mortgage servicers that seems unbelievable if you haven’t experienced it themselves. Most reasonable, honest people can’t begin to imagine the kind of systemic deceit being practiced by these big mortgage servicer banks.

The bank employees ask customers to provide reams of documents detailing their income and expenses and then ignore all that information and just make up numbers? Surely not! That’s surely not legal … moral … ethical … possible? How can it be allowed to happen?

Good question, but it does happen frequently. My financial information was faked¬† in at least two of the reviews of my mortgage loan for modification. Both times my income and expense figures — which I reported very honestly based on actual numbers that are backed up by bank statements and copies of actual checks and bills — were falsified.

Why? So that the figures fed into the secret computer program that determines HAMP eligibility would generate a denial. Why else?

I have to say my favorite part of the Reuters piece was the bit about the top-secret investor requirements that borrowers don’t meet. Talk about a lack of accountability and transparency in a system.

“More than two years after he first applied for a modification, the bank told him there was an investor restriction on the loan, which meant it couldn’t modify it.”

“That investor agreement was public.”

“But after confronting the bank with that agreement, which did not include any such restriction, the bank told him there was a previously undisclosed secret document that included the restriction.”

Did you catch that? “A previously undisclosed secret document.”

How is a homeowner supposed to fight undisclosed secret documents (which may or may not exist, just like the proof that banks actually own the debt on all the mortgages that have been securitized over the years.)?

The big mortgage servicers that tanked the economy in 2008 and whose actions continue to thwart any meaningful recovery took billions of dollars in bailouts from the American people. One of the only conditions of getting access to all that cash was that they had to agree to take part in the government’s “home preservation” programs such as the Home Affordable Mortgage Program (HAMP).

And HAMP has all sorts of guidelines that establish eligibility and create a process banks agreed to follow when dealing with their customers who are in financial difficulty as a result of the very same economic crisis the banks caused.

In addition, if your mortgage was sold off to or securitized, banks or so-called government-supported enterprises or entities like Freddie Mac or Fannie Mae, your mortgage servicer has contractually agreed to abide by a series of guidelines set by these “investors.”

Via the internet, people have access to both the HAMP guidelines and some of the servicing guidelines their banks are supposed to follow. Except the banks don’t follow them. And, for the most part, nobody seems to care.

Well, turns out it doesn’t really matter. Because they’re actually stringing you along and lying to you and denying your loan mod because they’re required to follow the requirements of some shadowy unknown entity as decreed in undisclosed secret documents.

Well, that explains it. If you don’t send documents you weren’t asked to send and you don’t comply with every provision of the undisclosed secret requirements, you aren’t going to get your mortgage modification. Now you know.




5 thoughts on “Why Your Mortgage Mod Was Really Denied

  1. this is very very interesting. i was just told by my loan preservation specialist the other day that someone who was denied a modification was quite upset and stated that wells fargo was just trying to get over on him and didn’t really care about them, (the homeowner). I hate to think that my contact person is playing this same game. It will be VERY interesting to see, if now that they have the required income form my social security, will there still be delays in granting this modification? there is NO reason why they should deny it, since i have a “Guaranteed fixed income” now for the rest of my life. I will keep you posted.

  2. Fingers crossed for you Sharon, but don’t hold your breath. There’s no reason by the numbers that I didn’t qualify for a mod a year ago, but Wells Fargo resorted to faking the numbers, just plain pulling expenses out of the air that didn’t exist to “justify” denying me. Even when you send in the correct paperwork, they pretend it’s wrong or missing or “stale” and they will string you along as long as they can. Hang in there, keep nagging your contact person and be ready to stick it out for the long haul. Depending on your circumstances and what your long-range plans are, there is a way to play the game against your servicer. Check out http://www.loansafe.org/forum/chase-mortgage-tell-us-your-chase-story/39095-hampster-wheel-game.html

    Let us know how it plays out for you!

  3. I applied for loan mod January , 2011 and was denied. I have steady income and explain my hardship. Since I was late in payment, Wells fargo sent me a letter of short sale. Perhaps in a month they will send my forclosure. What agency can i go to for help to make Wells fargo modify my loan

  4. Hi Jo,
    I wish there was some person or agency I could refer you to for reliable help fighting Wells Fargo’s foreclosure machine. Problem is, next to nobody in government from the Obama administration on down to state legislators will lift a finger against these rich companies that bankroll their election campaigns. Same with the attorneys general – they sold us out last year. And the so-called regulators of the financial services industry has neither the will nor the power (thanks to to actions of the bank lobby) to rein in these out-of-control institutions.
    If you live in a state that has a judicial foreclosure process, you might find an attorney who has figured out some strategies to fight the banks. If you’re in a non-judicial foreclosure state, your own state government probably has been lobbied into passing laws that give all the rights to the banks.
    You might also find some helpful advice to either prolong your fight or to help you exit on terms that work for you at loansafe.org.
    I would love to have something hopeful to say other than to wish you the best of luck in your fight. Do please tell everyone you can the story of how Wells Fargo has treated you and encourage them to think twice before doing business with any of the big five banks.

  5. Pingback: Don’t Blame Homeowners Whose Mortgage Mods Didn’t Work |

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