loan modification
Wednesday, September 8th, 2010California bankruptcy attorneys Zhou & Chini are seeing to many stories these days similar to the “Barbara Caswell” story about her home in rural west
Petaluma. Mrs. Caswell was being foreclosed on after starting a loan modification process with Bank of America
that quickly turned into “loan modification hell”. In an all-too-familiar story, the Caswell’s came on difficult times
and approached B of A to try and get a loan modification, but even after her husband got a job that allowed them to
resume payments at a higher rate, B of A would not accept their payments to stop the foreclosure process.
After submitting all their paperwork to get a loan modification and later to stop foreclosure, B of A sent them an eviction
notice “on June 14th. The Caswell family is being evicted from their home after starting a loan modification process with
Bank of America that quickly morphed into a foreclosure that could not be stopped. In an all-too-familiar story,
Mr. Caswell and his family came on hard times and tried to modify their home loan, but even after he got a job
that allowed them to resume payments at a higher rate, the bank would not take their money to stop the foreclosure
process.“The loan modification process is their responsibility and they are not respecting it,” said Caswell. “It’s
almost inhumane.”
After being asked to submit hundreds of pages of records in an attempt to get a modification and later to stop
foreclosure, the bank sent them an eviction notice on June 14.
“You think you will save your house after doing one more thing,” said Caswell. “I thought it was a matter of
working hard enough. But it doesn’t matter what you do.”
Caswell and her husband bought their Haverfield Lane home in 1992 and raised their daughter on the rural plot of
land. Caswell, who worked designing houses before her industry, was hit hard by the recession, designed three other
homes nearby on the six-acre subdivision called Haverfield Park.
“I dreamed it up and I created it,” she said. “It was the pride of my career.”
Originally the Caswell’s called Countrywide Financial, which was later taken over by Bank of America, for a loan
modification. Evidently a Countrywide employee told them to start the loan modification process by intentionally
missing two months payments and sending a letter of hardship. After going into arrears the Caswell’s started
sending in financial documents to show their situation. Bank statements, tax returns, hardship letter etc.
In December 2008, Mr. Caswell lost his job. After submitting documentation with no response from the bank about
whether a modification would be considered. They continued to make requests for a loan modification, but the bank
was either unresponsive or made unreasonable demands about their modification request, she said. They were told
that documents that they submitted had expired after 60 days, but they took longer than 60 days for the bank to
process. “We hear and see this all the time from our clients” says attorney Ron Chini, California bankruptcy attorney
The bank claimed that numerous documents were lost and had to be submitted again. Caswell went into bank
branches to try to speak with someone about the lack of transparency, but they always referred her to a call center.
“You never talk to the same person,” she said.
In November 2009, Bank of America filed a foreclosure notice on the Caswell’s.They continued to submit the banks
requested documents and recently her husband got a better job than he had had before they went into arrears.
“We obviously have been making a good-faith effort,” said Caswell. “They have not.”
Now the Caswell’s furniture sits in a storage unit. They are still trying to avoid foreclosure, but under the bank’s
policies they can’t move their furniture in and can’t fully move out. They have been sleeping on a floor mattress
while they await word on whether they will have to vacate their home or not. Unfortunately, many homeowners
throughout the country share similar stories.
“The communication with the lenders is terrible, I mean extremely bad,” Ron Chini, California bankrupcy attorney,
said about the large banks. “It’s really difficult for these struggling homeowners to find anyone that’s helpful.”
“They’re big banks facing even bigger problems,” Chini says. “It’s like they’ve got themselves in so deep they just
can’t keep up.”
Unfortunately there are ccomplications posed by different institutions involved owning different pieces of the loan. The mortgage servicer and investor who holds the note have different people all
in multiple departments and locations across the world processing these files. When a homeowner is in foreclosure and in “active negotiation” Bank of America tells them the loan modification package is “under review” and to call back 72 hours prior to the Trustee sale date to see if they will postpone the sale. Then you call back and they tell you they still can’t give you an answer after 9 months and to call back the day before your home is to be sold at the courthouse steps!
“It’s a complete debacle, a comedy of errors,” says one bankruptcy attorney at the firm. These people appear to be complete idiots. They have no idea the stress they cause these families. A husband trusts his wife to follow the banks loan modification process to get help, or visa versa, and next thing you know they’re losing their home and have to file bankruptcy to stop the foreclosure. Beyond logistics, bankruptcy attorneys at Zhou & Chini as well as others at the firm see the delays as deliberate tactics from these lenders. I mean they’re either complete morons or simply don’t care. I mean seriously, how long does it take to reviw a file? When the Caswell’s applied for their loan I’m sure it didn’t take 9 months!
“I don’t know what the reason is, but it’s a tactic they’re using,” said Timo Rivetti, a principal with Keller Williams
Realty. “Sellers are frustrated, buyers are frustrated; so are real estate agents, cities and counties.”
“Mark,” who recently sought a loan modification for Petaluma home but wished not to give his real name, said he first
went to an advertised “home loan modification specialist” in December 2008. He paid $2,000 up front, but after four
months, the company hadn’t done anything. It turned out to be a scam.
“Mark” then sought a loan modification from his bank, Chase, which asked him to fax 300 pages of financial
documents. He did so six separate times, each time the bank claiming that they didn’t receive the papers.
“The modification was a joke,” he said. “It’s so obvious a stall tactic that even a child could see it.”
Eventually, he worked out a short sale on his home, and will lose $900,000. “At least we’ll be out from debt,” he
said.
“I don’t understand it. How can it be more beneficial for a bank to foreclose on a home than keep a
family in a home?” said Bertha Medina, a counselor at the California Human Development Corporation.
Homeowners allege that banks are drawing out loan modifications in an effort to foreclosure, which can be actually be a financial benefit for them.
“We file emergency bankruptcies all the time for families with failed loan mods, even after making all their scheduled trail mod payments” says James D. Zhou, senior partner at Zhou & Chini.
Although foreclosing on a home can be very costly if the lender owns the mortgage, the same is not true if they are just servicing the loan. Unlike lenders and borrowers, loan servicers have no incentive not to foreclose on these homes. While processing a loan modification can be very costly for these mortgage servicers, foreclosure may not be, and could be more profitable. Until recently theses servicers didn’t even have to give a reason for denying a loan modification. Now they throw out terms like “you were denied due to NPV”, Really, what’s that? Net Present Value basically means the value to the investor post modification, short sale or foreclosure. If it’s more profitable to foreclose on the property they will not modify the loan. Boy oh boy, it would have been nice to know this 9 months ago! Honestly, who can you trust these days? Certainly not your mortgage servicer!
In a class-action lawsuit filed against Bank of America the claim is that the bank services over 1 million mortgages that qualify for loan modifications, but that only 12,761 permanent modifications have been granted. I wonder if they would even be around is their loan department was run that way? The law suit claims that the bank has a failure rate of 99.9 percent on loan modifications and contends that Bank of America is not meeting restrictions placed on bailout money received that was designed to encourage loan modifications. I use to be a compliance attorney at one of the first law firms providing loan modification services to their clients. This was back in the day (2 years ago) before MHA and HAMP government programs were available. Homeowners would come to the firm seeking help modifying their home loan. We would gather financials, determine the propensity to get a loan modification, and if the head attorney felt comfortable taking the case we would attempt to negotiate a loan modification. Well, that was then, and this is now. What a mess!
Being a bankruptcy attorney and foreclosure defense advocate unfortunately I may not meet my clients until filing bankruptcy is their only option to avoid foreclosure. In the case like the Casswell’s, who knows what would of happened if they hired an attorney early in the process. I know this though, pretty much every client I have met with that attempted a loan modification with their lender has failed. It appears the fox is guarding the hen house, and homeowners need to be careful or they could end up losing their home.
The bankruptcy attorneys at the Law Offices of Zhou & Chini encourage homeowners attempting a loan modification to call for a free and confidential consultation. Pre planning is critical if you want to save your home, or even if you want to walk away. You don’t want to be left with a huge 1099 or deficiency judgment in the event of a short sale or foreclosure. For more information visit our site at http://www.bankruptcyattorneyincalifornia.com
