Loan Servicer Bungles Hardship Loan Modification

by Mel from Berwick, PA and by Mike W. from North Port, FL

Ask Kate when your loan servicer bungles your hardship loan modification process: Mel's bank is displaying outrageous behavior. The loan servicer has the nerve to deny their mortgage modification for being too far behind on payments. Yet it had no qualms about taking three years to process their request. Meanwhile, Mel's monthly payments fell further and further behind.


Mike asks how to get an affordable payment with a 2nd mortgage that is almost 7 times the size of his 1st mortgage. I have a plan!

Help to Stop Foreclosure

By Mel from Berwick, PA
Help to Stop Foreclosure


I have been trying for a home modification now since 2011 after some medical issues caused us to fall behind. I tried several times on my own to modify my loan with the loan servicer and each time I was denied.

So we hired a lawyer in March 2013 and just received a denial today.

The investor IndyMac/OneWest Bank stated that since we are now 30% behind on an FHA Loan (because when we filed for a modification, no payments are made) there is nothing we can do but foreclose.

What are my options and do I have a leg to stand on to stop foreclosure proceeding?

***zz-portrait-left.shtml*** Ask Kate answers: Help to Stop Foreclosure

Hi Mel,

This is outrageous behavior on the part of the bank. They chose to drag their heels for three years and now have the nerve to deny your loan modification for being too far behind on payments.

Contact HUD's interactive voice system at 800-569-4287 to locate one of their nearby sponsored housing counseling agencies. See if you can enlist them to help reverse the modification denial. Don't be embarrassed to stress how the bank itself contributed to the very reason they are using to deny your loan mod.

You can also go straight to Making Home Affordable for help through their hotline (888-995-4673) for distressed homeowners. Read about this round-the-clock service at Free Making Home Affordable Housing Counselors and make sure you mention 'MHA Help' to get extra assistance following up with your loan servicer.

I would also use this list to send your letter of complaint to your elected representatives, the BBB, and the newest watchdog, the Consumer Financial Protection Bureau.
Don't be shy. Your mission is to stir up as much attention to your plight as possible. But don't waste any time getting started. The same lender that is slower than a snail at the hardship loan modification process can be exceedingly speedy at foreclosure proceedings.

Best wishes,


How to Modify 1st and 2nd Upside Down Mortgages

By Mike W. from North Port, FL
How to Modify 1st and 2nd Upside Down Mortgages

Hello Kate,

My 1st mortgage is a Freddie Mack with a $39,000 note and my 2nd is an interest-only with Bank of America at $274K. My home is worth $195K.

I've never missed payments, but it's getting tough etc. Are there any options for me?

Thanks. Mike W.

***zz-portrait-left.shtml*** Ask Kate answers: How to Modify 1st and 2nd Upside Down Mortgages

Hi Mike,

When a 2nd mortgage is so much larger than a 1st, it's often due to consolidated consumer debt.

Although that sometimes offers tax advantages, the large 2nd is difficult to refinance compared to a 1st because it positions the transaction into a cash out refinance status. Read more at Refinance with Cash-Out Woes.

Here is what I'd suggest doing. Call your loan servicer to modify your mortgage under the HAMP program. By the way, your loan servicer is required to participate because your mortgage is backed by Freddie Mac.

Additionally, Freddie Mac no longer requires a hardship.

Then once your permanent loan modification process is complete, call Bank of America for a modification and principal reduction of the 2nd mortgage. Your request will fall under the Making Home Affordable Programs, Principal Reduction Alternative (PRA) and Second Lien Modification Program (2MP), of which BOA is a participant.

Best wishes,


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Refinancing My Motgage After Bankruptcy
by: Martin from Rochester,MI

Is it impossible to refinance a home equity loan after bankruptcy has been filed?

Hi Martin, Kate here...

While it is legal to apply for a refinance after bankruptcy, obtaining loan approval for a 2nd mortgage (home equity loan) may be a different story. This is because a bankruptcy dramatically lowers credit scores below minimum credit score standards for most 2nd mortgage programs.

Gradually over time and with re-established credit, you will probably begin to see a rebound in your credit scores after bankruptcy discharge. Get help for strengthening your credit scores here.

I would suggest that you contact the loan servicer on your 1st mortgage to see if they participate in HAMP loan modifications. (See above.)

If so, contact your 2nd mortgage holder to see if they participate in the 2MP program which modifies 2nd mortgages following a successful HAMP process on the 1st. (See above.)

Best wishes, Kate

P.S. If you are in the middle of a BK at this time, draw that to the attention of both loan servicers to save time down the road.

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