Persistance Pays Off for Some

When the government unveiled HAMP (home affordable modification program), it was estimated that up to 4 million borrowers would have their loans modified by rate and/or loan balance reduction thus saving their homes from foreclosure.

Here we are 2 years later, and the latest reports show that only about 522,000 loans were permanently modified and another 792,000 ‘trial modifications’ were cancelled by the banks. The blame for the low success rate is placed on everything from too much red tape to uncooperative borrowers to the fact that the program is voluntary and the banks don’t want to volunteer.

Citing these examples, last week House Republicans introduced HR 430, a bill to repeal the failed HAMP program.

All will not be lost however, because while HAMP has been a dismal failure, more and more people are getting their loans modified by working directly with their lenders instead of the government program.

In fact, according to the Hope Now Alliance of servicers, 1.24 million loans were modified through private lenders rather than the HAMP program in 2010.

Bank of America claims they have increased staffing in their ‘default servicing’ department by 30,000 to meet the growing demand.

Chase, Wells Fargo and others are following suit, realizing that modifying terms and keeping paying customers is a lot healthier for their bottom line than foreclosures are.

So, with banks willing to modify their loans to save them from having to foreclose, and upside down borrowers ready and willing to cooperate with new loan terms, it should be a walk in the park, no?

Not so fast! It seems that most people have to jump through hoops, send in the same documentation over and over again to different parties who will either deny receiving it or state that it is old data which needs to be updated. Many end up frustrated and give up on the whole process, letting their homes go into foreclosure or short-sale, ruining their credit and forcing them to relocate.

Though I’d never suggest or advocate withholding payments, it is a widely held belief among consumers and experts alike that in many cases, the lenders won’t consider a modification if the borrower is making payments on time. They seem to take the position that if they payments were a hardship, they wouldn’t be making them.

Many believe that one has to stop making payments in order to get their attention.

So, rather than have a simple procedure for proving one’s case for a modification, they seem to want you to hurt them in the pocket book and hurt yourself by lowering your credit scores. It doesn’t make sense, but that’s what it seems like for so many borrowers. Be careful though, if you withhold payments too long (6 months for most California loans) will be in default on your mortgage and the bank can foreclose. Seek legal advice on this.

It can take time, patience, and persistence to get a successful loan modification, but it can be done.

Here are a couple of recent examples:

Dominick D lost his job as a superintendent for a construction company and had to start with another company as a carpenter. His salary went from $128,000 to $61,000 over night. With over half of his salary going to pay his mortgage, and no end in sight, he applied for a modification.

After being denied. He stopped making payments. A couple of months later, someone from the collection department suggested he try a modification.

For 19 months Dominick worked consistently and persistently with the bank, calling every week, quickly responding to any and all requests for documentation. During that time he was told on 4 occasions that he was ineligible for the program due to income, or dropped from the program for non-compliance.

He kept records of every call, from the time he made it, length of time on hold, who he spoke to and where they were located and details of the conversations. He was able to identify who said what and when. He saved emails and fax receipts, too.

In the end, he was able to reach someone who could make a decision. He proved his hardship and they modified his loan taking his balance from $373,000 down to $301,000. Payments went from $2580 down to $1768. Interest rate from 6.75 down to 4.25. It was a hard, stressful and time-consuming ordeal, but he saved his home.

For Steve P it took 22 months of pretty much going through what Dominick did. Week after week he was calling, explaining, sending in documents and proving that his condo wasn’t worth what he owed on it, and he finally got his loan balance dropped from $308,000 to $218,000 and a reduction in payments from $2053 to $1240 per month. His rate went from 7% to 5.25%.

For both Dominick and for Steve, the stress is over and it was worth the battle. Many others have been successful too. Looking back, the banks could have saved a lot of time and expense by processings these modifications more efficiently, and today they say they are indeed getting better.

So, if you’re truly facing a hardship, still have steady income and want to keep your home, do everything you can to save it, and don’t just take ‘no’ for an answer, because in a foreclosure, nobody wins.