Mortgage Modification Snags and Insults

by Susan R in ND, by Anita, by Ms Jackson in GA, by Robert in MS

Ask Kate about mortgage modification snags and insults: After Susan worked with Wells Fargo for 9 months on her HAMP modification, the final offer was $13.00 less than her original payment. Anita was devastated even though her modification was granted! You'll see why in a moment. Ms Jackson wants to stay in her underwater home and hopes for alternatives to deed-in-lieu and short sale after her modification was denied.


Possible Suit Against Wells Fargo

By Susan R from Minot, North Dakota
Ask Kate: Mortgage Modification Snags and Insults

Kate, after working with Wells Fargo for 9 months on my HAMP qualification (6 months with a modified trial payment about $250.00 less), I received the final offer that was $13.00 less a month than my original payment. The reason given was my income.

I worked at JoAnn Fabrics from September 2009 to May 2010. They only used 2009's income with the much higher seasonal hours and annualized that number.

I also worked at HR Block from February to April of 2010 in a seasonal position. They annualized that one as well, figuring I would make that much every 2 months for the year.

They upped my Social Security income by $500.00 a month.

AND lo and behold I made too much money to qualify for HAMP and lost my home to foreclosure.

Although I will receive the $840 and whatever the foreclosure review comes up with, I wonder if there a chance to sue for a more realistic amount? Please advise.

***zz-portrait-left.shtml*** Ask Kate answers: Possible Suit Against Wells Fargo

Hi Susan,

It's unfair of underwriters (bank employees with authority to approve mortgage applications) to use faulty methods while averaging income.

They would never annualize a few months of income if you were applying for a new mortgage. In fact, that would be considered reckless practice, much like no-income verification loans that became the scapegoat of the financial collapse.

I encourage homeowners to write letters of explanation before applying for a mortgage or mortgage modification to explain their income. The only exception would be the straight-salaried person who receives one W2 a year.

Even so, the story behind your debts, credit history, and savings patterns are buried deep in a loan file. A letter of explanation to the underwriter may be the only way to personalize your pile of paperwork.

I think a mortgage modification offer to lower your payment $13 is insulting. And a payment of $840? Not nearly enough penalty to banks who broke laws that specifically protect the rights of all homeowners.

National Consumer Law Center (NCLC)

However, per the National Consumer Law Center (NCLC), by accepting the compensation, you did not waive your rights:
Most importantly, this settlement protects homeowners by: Preserving a homeowner's right to defend a foreclosure against mortgage company and servicer abuses. Forbidding waiver of claims in the loan modification context. Allowing homeowners to pursue independent litigation against mortgage servicers for abusive acts.
Furthermore, homeowners are encourage to contact their state's Attorney General to check into further progress. Or contact your ND Attorney General Wayne Stenehjem at 701-328-2210.

Go here for more on the 2013 National Mortgage Settlement.

Best wishes,


Refinance FHA Mortgage after Home Modification

By Anita

Dear Kate, due to a job loss, in 2009 I did a home modification. From 5% to a modification of 4.185%. It was hell on earth working with Wells Fargo.

I conversed with many people from customer service during this process and was very confused. I was under the assumption that after the 4 months of payment instructions from them, that my past due payments would be erased from my credit report.

However, as I made my payments per their instructions, they still showed I was 4 months past due on my credit report when the modification was granted. I was devastated to say the least.

Now I would like to refinance to a FHA mortgage. My credit report is still good, however I was told that I could not do a refinance because of my modification history and have a FHA loan. I have been current on payments since then. Can you advise? Thank you so very much.

***zz-portrait-left.shtml*** Ask Kate answers: Refinance FHA Mortgage after Home Modification

Hi Anita,

It's a shame after banks break the law, they have the audacity to report delinquent payments to credit bureaus. Talk about a mess with similarities to life after short sale.

Try applying at another mortgage company for your FHA refinance. After a few years have passed without late house payments, you should be able to refinance. Overall, FHA is forgiving.

For details on Federal Housing Administration home loans, go to FHA Refinance.

Best wishes,


Mortgage Refi or Modification Options

By Ms Jackson in Atlanta, GA

Hi Kate, Purchased home in 2006 with Countrywide and off the back they set it up with a 2nd mortgage, a non-statement loans where my employment was not verified. The 2nd mortgage was originally with Countrywide.

My loan was securitized of course... Bank of America acquired the loan and sold it to Green Tree. I had a forensic audit done on my loan that found RESPA violations.

The 1st loan is a 10 year interest free then goes to 6%, $1680 a month. The 2nd loan is a fixed rate of 8.625%, $490 a month.

The 1st mortgage is not FHA, Fannie Mae, or Freddie Mac, so I'm assuming I would not qualify for the HARP program?

Last year I was unemployed and fell behind 2 payments, got on the Hardest Hit program where they would pay partial mortgage for 18 months. This has my payments back on track, yet the 2 months I missed are still due.

This program requires me to stay in the home for 5 years after this Hardest Hit assistance is complete or all monies would have to be repaid. Homes in my subdivision are now selling for a little over half what we originally paid.

I am now gainfully employed but divorced, trying to be proactive and stay in my home. I advised the Hardest Hit program of my employment circumstance and they advised the program will provide assistance (with modifications) up to the 18 months.

In the meantime, I went through the HAMP process, denied...and this wasn't the first time I've applied. I applied prior to my unemployment and divorce situation, but while Bank Of America took so long, circumstances changed.

My mortgage is underwater by about $25,000, unable to get refinanced or qualify for HAMP or HARP. What are other options besides a short sale or deed in lieu?

I would like to stay in my home if possible but will not pay that high mortgage on an upside down home. Thanks so much!

***zz-portrait-left.shtml*** Ask Kate answers: Mortgage Refi or Modification Options

Hi Ms Jackson,

Making Home Affordable's 2 main alternatives to foreclosure are short sale of underwater homes and deed-in-lieu of foreclosure.

Besides those, Making Home Affordable offers in return for your deed, a lease-back at customary rents called Deed for Lease. Personally, I think leasing back your own home from the bank sounds disheartening. However except for tax breaks, being in debt to the bank for a mortgage isn't that different.

Which is why I say in the end, the best practice is to beat the bank at their own game. Go here for more details: ***zz-newsletter.shtml*** Best wishes,


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Removing Spouse from Modified Mortgage
by: By Robert from Jackson, Mississippi

Kate, I did a Making Home Affordable modification in May 2010. At the time, I had just finalized a divorce.

My former wife did not sign any documents for the modification. Only my signatures and documentation were provided.

I did, however, provide a quit claim deed signed by her. I thought that based on the fact that she didn't sign any of the documents for the modification that the modified loan would only be in my name.

Of course that was not the case. Subsequently, I have been trying to refinance my ex-wife off the mortgage but keep getting the run around. Please help.

Hi Robert, Kate here... How frustrating!

I had to go look this one up. With HARP refinancing, Fannie Mae says they allow this if the loan is successfully run through their underwriting software. Of course that does not mean the lender won't add an infuriating overlay.

Now here is the HAMP guideline:
Unless a borrower is deceased or divorced, all parties who signed the original loan documents or their duly authorized representative(s) should sign HAMP documents.
So technically, the lender should be able to modify the terms to include you and exclude your ex-spouse.

But I'm not sure you can depend on a lender to follow the guideline. Even so, you can point them to the Making Home Affordable Program Handbook for Servicers of Non-GSE Mortgages (4.1) where the guideline is found.

Best wishes, Kate

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