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

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.
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.

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,

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