HAMP Mortgage Modification and Loan Servicer Misfires

by Helen in Schuylkill Haven, by Armand in Highland, by Whirljack in Coeur d Alene

Ask Kate about mortgage modification and loan servicer misfires: Helen's well known bank raised her modified house payment by $600 a month to cover property taxes on a parcel she no longer owned. Adding insult to injury, the bank refuses to return the funds to Helen, putting her at risk for foreclosure. Armand recovered from a double-lung transplant and asks for options should their HAMP modification be denied. Whirljack's lender says that it's not possible to modify a mortgage that was previously modified. Hmmm...


Ask Kate: Can Lender Raise My House Payment After Modifying My Mortgage

By Helen in Schuylkill Haven, PA

HAMP Mortgage Modification and Loan Servicer Misfires
Kate,

I have been in a modification since 2012, obtained through my lender, but was told the 2 percent interest rate would only be good for 5 years.

So come September of 2017 there will be an adjustment made but I have no idea how much. Is this legal? Another party told me the modification would be in place for the term of the loan. Are lender's allowed to make adjustments like this?

They also keep raising my monthly payments because of what they call escrow adjustments even though my taxes have not gone up in years. The last time they did this they actually picked up a parcel I had sold in 2008 and had me paying an additional $600 a month towards a bogus tax account. This caused undo hardship and I fell behind.

They said they would refund me the over payments. But when the time came and they finally got the account straightened out (6 months later) they told me they couldn't give me back the extra escrow funds because I wasn't current on the loan. I asked them to apply the funds to the balance due and they refused to do that as well. I then asked them to add the 3 months past due to the end of the loan. You guessed it, they refused to do that as well. They told me I had to do yet another modification in order to do that.

So in September 2015, I reapplied for another modification. 6 months later (seems to be a pattern with them) they sent me a denial because I had defaulted on the original modification. What am I suppose to do from here? If you have any suggestions it would be greatly appreciated.

Ask Kate at Get-Your-Best-Mortgage-Rate.com
Kate's Answer: Can Lender Raise My House Payment After Modifying My Mortgage

Hi Helen,

Most loan modification terms contain interest rate adjustments. So, yes, raising the interest rate is legal IF the rate adjustments were disclosed to you in writing.

Go back to the modification documents you signed to re-read them. They should tell you when to expect the adjustments and the amount of adjustment. The loan papers will also disclose pending balloon payments.

Written notice will come from the lender if your payments are scheduled to increase. By the way, to avoid scams, never take instructions over the phone to send your mortgage payments to a different address. Lenders must always put this in writing.

Permanent Streamline HAMP with Fixed Interest Rate


The exception to modifications with interest rate adjustments is the permanent streamline HAMP program with a fixed interest rate for 40 years. It may include the potential for principal forbearance or principal forgiveness if the borrower is underwater.

Know the difference! Learn how to distinguish between forbearance and forgiveness at HAMP Loan Modification: Principal Forbearance vs Principal Forgiveness.


To find out if you received a streamline modification with a fixed rate, you will need to peruse your loan documents from your modification. Or you can call your loan servicer. But I'd rather you reviewed your modification paperwork yourself so you know for sure!

What Are (Highly Regulated) Escrow Accounts


When property taxes, homeowners insurance, and mortgage insurance payments are paid by the lender, a borrower is first required to set up an escrow account. Not only do monthly payments go into the account, the lender is permitted by law to pad the balance by collecting from the borrower an amount equal to a couple of payments.

How to Survive Loan Servicer Misfires


Escrow accounts are highly regulated. This is why I hope you will not stand by while they refuse your requests for the escrow funds that they had no right to collect in the first place. Since you tried going directly to the loan servicer for help, I'd now go straight to a HUD-approved housing counselor that specializes in Making Home Affordable Programs such as HAMP. Go here to learn how to contact a counselor and how to prepare for the call... Free Making Home Affordable Housing Experts.

If you are not satisfied with the results, file a complaint with Pennsylvania's Attorney General and the Consumer Financial Protection Bureau, as well as your elected government officials, both state and federal. Don't forget the Better Business Bureau. I've laid the groundwork already at How to Contact Washington DC and Your State Government.

Remember to explain how the bank collected escrow money based on another property, one you don't even own. The most appalling part is that the $600 a month for an escrow payments (again, for property taxes on another house, one you no longer even own) could end up being the cause of mortgage foreclosure.

Most homeowners are not thrilled about airing their financial problems in public. Understandable. But keep in mind that as a last resort, you could contact a local newspaper or radio station and tell them your story. Or as Tom did, contact a pro-bono attorney who is chomping at the bit to take on a shady loan servicer. See Tom's story at Predatory Lending Practices, Even After Surrendering House in Bankruptcy.

Best wishes and keep your head up,

Ask Kate

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Lender Says I Can't Modify My Existing Modification Loan
by: Whirljack from Coeur d Alene, Idaho

Can a borrower current in their HAMP modifications (1st and 2nd liens) receive another HAMP modification due to hardship and interest rate increase?

Wells Fargo (my servicer) said Freddie Mac (GSE) owns my loan and only one HAMP modification is allowed. Any idea why GSE loans cannot obtain another HAMP modification?

Hi Whirljack, Kate here.

Freddie Mac's 'one and done' rule regarding HAMP was news to me. With a couple of exceptions, that means one HAMP per property financed with a mortgage backed by Freddie Mac. But that would not necessarily rule out their loan servicer granting a standard (requires a hardship) or streamline (does not require a hardship) Freddie Mac modification after HAMP. So ask for one of those.

The 2MP modification program for 2nd mortgages, in my opinion, is sketchy at best, so it isn't easy predicting a response from the lien holder. While Making Home Affordable says that 2nd mortgages can be modified only once under the 2MP program, it also tells loan servicers that they must make another 2MP offer (along with a 2nd mortgage in-house modification offer) if the 1st mortgage is undergoing a subsequent modification. Go figure.

Before modifying a 2nd mortgage, be sure to read 2nd Lien HAMP Mortgage Modification Payment Quadruples After 5 Years.

Best wishes, Kate

Mortgage Options if HAMP Approval Fails
by: Armand S. from Highland, MD

Hi Kate,

Due to my double-lung transplant 7 years ago and being self-employed, we fell hopelessly behind on our home. We had 'a guy' who was able to keep us in the house, even though we have not paid a payment in over 5 years. Unreal, I know. The house is worth almost what the loan balance plus arrears add up to.

Our old loan was at 6 percent. We are now back on our feet, and make a nice combined income with little debt (other than a 2nd on the house). We were just granted a HAMP Tier 2 on a beach house we own, that was 100K underwater.

We just want to stay in the house, but may not qualify for a HAMP because of the home value. We are under review for a loan mod, but in absence of a HAMP, any other suggestions?

We also have a 2nd mortgage that we initially used to but the beach house before I got sick. Do they count that as an unpaid balance on the house? Complicated, I know. Thanks.

Hi Armand, Kate here.

Congratulations on getting your transplants!

Making Home Affordable calculates the loan-to-value (LTV) ratio by dividing a 1st mortgage loan balance by the appraised value of the home. Another calculation, combined-loan-to-value (CLTV), is achieved by dividing the combined 1st and 2nd mortgage loan balances by the appraised value of the home. Both calculations are considered for modification approval.

Read more about loan-to-value at Who Broke The Mortgage Loan To Value Calculator.

If you are not eligible for HAMP modification, the next step in the Making Home Affordable Program is Home Affordable Foreclosure Alternatives (HAFA) which includes short sale and deed in lieu of foreclosure (DIL), including $10,000 toward your relocation expenses.

Read more about mortgage options if your HAMP approval fails at Short Sale vs Agony of Homeownership and Deed-in-Lieu of Foreclosure - HAFA Assistance.

Best wishes, Kate

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