MYTHS of MODIFICATION EXPOSED

MYTH 

  • any imaginary person or thing spoken of as though existing
  • any fictitious story, or unscientific account, theory, belief, etc.
  • Kudos to investigative journalist Kevin Hall with McClatchy Newspapers for inserting himself into the so called “loan modification” process and exposing the farce that is being perpetrated on the American public in the article below. Why is this happening? Pretty simple, two reasons, first the fact is that in almost all cases where you have a mortgage that has been securitized, you the homeowner or you the lawyer representing the homeowner are not dealing with a party that has authority to modify the loan and second they NEED a default. One of the many missions of this site is exposing the truth, hence the name “Livinglies.” The reality is that they, the “pretender lender,” know the debt is unenforceable, the real party in interest is unidentifiable in most cases, and the title to the property has a cloud on it. So what do they REALLY need:

    1. They need new paperwork and they need new signatures on something they can represent as your affirmation of the debt….to THEM… not the party that actually funded your loan who may be damaged by a default or even the party still on the deed or mortgage at the county recorders office. 
    2. They need you to waive any rights and claims you could assert because the “real lender”  or “real party in interest” and/or various parties in the chain of securitization assumed liablity for those claims you could assert as the notes flowed up the chain.
    3. Here’s the biggie, they have insurance in the event of default, they can’t collect on the insurance, credit default swaps, PMI, etc.  in the event of modification.

    Insurers have a habit of including exclusions into policies of all types and credit default insurance policies are not different. Here is a little sample of a PMI exclusion:

    “Notwithstanding any other provision of this Policy, the coverage extended to any Loan by a Certificate of Insurance may be terminated at the Company’s sole discretion, immediately andwithout notice, if, with respect to such Loan, the Insured shall permit or agree to any of thefollowing without prior written consent of the Company: (1) Any material change or modification of the terms of the Loan including, but not limited to, the borrowed amount, interest rate, term or amortization schedule, excepting such modifications as may be specifically provided for in theLoan documents, and permitted without further approval or consent of the Insured.“*

    *Radian Guaranty Master Policy, Condition 4.C, at Master_Policy

    So who is the “insured”? Well, the bondholders who put up the money that was actually used to fund your loan, reality is they are the only other party other than you that has been damaged in this whole mortage meltdown. Every other party between you and them was an intermediary, who made a killing, and had no capital at risk. The truth, there is no incentive or reason to modify your loan. In order to collect on the insurance they need a default, not a modification.

    Why do you think they want you to use the “fax” to resend them your “modification” paperwork for the umpteenth time? So they can “lose” it again. If they allowed you to scan and email it to them or send it Certified Mail Return Receipt Requested you would have evidence that a) they received it b) who received it and c) when they received it. Then all of a sudden you have a timeline, then all of a sudden someone has to be accountable and explain why they received your information 3 months ago and you haven’t heard “boo” since…

    They know that 60% of these “modifications” are back in default within a year so they need to clear the deck to foreclose when that happens. Meantime, with regard to these “trial” modifications, the paperwork I have seen explictly says that the payments will NOT be credited to your loan account but will be placed in a “suspense” account until after the trial modification period is done. Now, if you fail to complete the trial period or when the “trial” period is completed and you did comply, but they tell you they cannot approve your for a modification…who do you spose keeps that money sitting in the suspense account?

    Bottomline folks, even if you are “working with your servicer on a loan modification” you need to consult a competent attorney, don’t wait until the wolf is at the door to start looking for one.

    If you are a competent attorney, practicing in this area and not on our list of “Lawyers that Get It” we want to hear from you.

    Homeowners Often Rejected Under Obama Plan

    By Kevin G. Hall G. Hall | McClatchy Newspapers

    WASHINGTON — Ten months after the Obama administration began pressing lenders to do more to prevent foreclosures, many struggling homeowners are holding up their end of the bargain but still find themselves rejected, and some are even having their homes sold out from under them without notice.

    These borrowers, rich and poor, completed trial modifications of their distressed mortgage, and made all the payments, only to learn, often indirectly, that they won’t get help after all.

    How many is hard to tell. Lenders participating in the administration’s Home Affordable Modification Program, or HAMP, still don’t provide the government with information about who’s rejected and why.

    To date, more than 759,000 trial loan modifications have been started, but just 31,382 have been converted to permanent new loans. That’s averages out to 4 percent, far below the 75 percent conversion rate President Barack Obama has said he seeks.

    In the fine print of the form homeowners fill out to apply for Obama’s program, which lowers monthly payments for three months while the lender decides whether to provide permanent relief, borrowers must waive important notification rights.

    This clause allows banks to reject borrowers without any written notification and move straight to auctioning off their homes without any warning.

    That’s what happened to Evangelina Flores, the owner of a modest 902 square-foot home in Fontana, Calif. She completed a three-month trial modification, and made the last of the agreed upon monthly payments of $1,134.60 on Nov. 1. Her lawyer said that in late November, Central Mortgage Company told her that it would void her adjustable-rate mortgage, which had risen to a monthly sum above $2,000, and replace it with a fixed-rate mortgage.

    “The information they had given us is that she had qualified and that she would be getting her notice of modification in the first week of December,” said George Bosch, the legal administrator for the Law Firm of Edward Lopez  and Rick Gaxiola, which is handling Flores’ case for free.

    Flores, 58, a self-employed child care worker, wired her December payment to Central Mortgage Company on Nov. 30, thinking that her prayers had been answered. A day later, there was a loud, aggressive knock on her door.

    Thinking a relative was playing a prank, she opened her front door to find two strangers handing her an eviction notice.

    “They arrived real demanding, saying that they were the owners,” recalled Flores. “I have high blood pressure, and I felt awful.”

    Court documents show that her house had been sold that very morning to a recently created company, Shark Investments. The men told Flores she had to be out within three days. The eviction notice had a scribbled signature, and under the signature was the name of attorney John Bouzane.

    A representative in his office denied that Bouzane’s law firm was involved in Flores’ eviction, and said the eviction notice was obtained from Bouzane’s Web site, www.fastevictionservice.com.

    Why would a lawyer provide for free a document that gives the impression that his law firm is behind an eviction?

    “We hope to get the eviction business,” said the woman, who didn’t identify herself.

    Flores bought her home in 2006 for $352,000. Records show that it has a current fair-market value of $99,000. The new owner bought it for $78,000 at an auction Flores didn’t even know about.

    “I had my dream, but now I feel awful,” said Flores, who remains in the house while her lawyers fight her eviction. “I still can’t believe it.”

    How could Flores go so quickly from getting government help to having her home owned by Shark Investment? The answer is in the fine print of standard HAMP documents.

    The Aug. 25 cover letter from Central Mortgage Company, the servicer that collects Flores’ mortgage payments, offered Flores a trial modification with this comforting language:

    “If you do not qualify for a loan modification, we will work with you to explore other options available to help you keep your home or ease your transition into a new home.”

    CMC is owned by Arkansas regional Arvest Bank, itself controlled by Jim Walton, the youngest son of Wal-Mart founder Sam Walton.

    A glance past CMC’s hopeful promise finds a different story in the fine print of HAMP document, which contains standardized language drafted by the Obama Treasury Department and is used uniformly by lenders.

    The document warns that foreclosure “may be immediately resumed from the point at which it was suspended if this plan terminates, and no new notice of default, notice of intent to accelerate, notice of acceleration, or similar notice will be necessary to continue the foreclosure action, all rights to such notices being hereby waived to the extent permitted by applicable law.”

    This means that even when a borrower makes all the trial payments, a lender can put the house up for auction if it decides that the homeowner doesn’t qualify — assuming that foreclosure proceedings had been started before the trial period — without telling the homeowner.

    Until now, lenders haven’t even had to notify borrowers in writing that they’d been rejected for permanent modifications.

    In January, 11 months after Obama’s plan was announced, homeowners will begin receiving written rejection notices, and the Treasury Department finally will begin receiving data on rejection rates and reasons for rejections.

    The controversial clause notwithstanding, the handling of Flores’ loan raises questions.

    “Foreclosure actions may not be initiated or restarted until the borrower has failed the trial period and the borrower has been considered and found ineligible for other available foreclosure prevention options,” said Meg Reilly, a Treasury spokeswoman. “Servicers who continue with foreclosure sales are considered non-compliant.”

    CMC officials declined to comment and hung up when they learned that a reporter was listening in with permission from Flores’ legal team. Arvest officials also declined comment.

    McClatchy did hear from Freddie Mac, the mortgage finance agency seized by the Bush administration in September 2008. Freddie owns Flores’ loan, and spokesman Brad German insisted that Flores was reviewed three times for loan modification.

    “In each instance, there was a lack of documentation verifying that she had the income required for a permanent modification,” German said.

    That response is ironic, said Michael Calhoun, the president of the Center for Responsible Lending, a nonpartisan group in Durham, N.C., that works on behalf of borrowers.

    “These lenders gave loans with no documentation and charged them a penalty interest rate for doing so. And now when the people ask for help, they are using extravagant demands for documentation to give them the back of their hand and continue to foreclosure,” Calhoun said.

    German said that Flores was sent a letter on Nov. 24, which would have arrived several days later, given the Thanksgiving holiday, informing her that she’d been rejected for a permanent modification. Flores and her attorney said she never got a letter, and neither Freddie Mac nor CMC provided proof of that letter.

    Exactly one week after the letter supposedly was sent, Flores’ home was sold to Shark Investments. That company was formed on Aug. 19, according to records on the California Secretary of State’s Web site. Shark Investments, apparently an unsuspecting beneficiary of Flores’ woes, has no phone listing. The Riverside, Calif., address on the company’s filing as a limited liability company traces to a five-bedroom, four-bath house with a swimming pool.

    German didn’t comment on whether Flores received sufficient notice under Freddie Mac rules, or how the home could move to sale so quickly.

    Flores’ legal team, which specializes in foreclosure prevention, thinks that lenders and servicers are gaming Obama’s housing effort.

    “It seems servicers are giving people false hopes by sending them a plan, and they are using the program as a collection method, getting people to pay them with no intention of modifying the loan,” said Bosch. “I believe they are using this as a tool to suck people dry.”

    Dashed hopes aren’t exclusive to the working poor such as Flores.

    David Smith owns a beautiful home in San Clemente, Calif., the location of the Richard Nixon Presidential Library. Smith purchased his five bedroom home four years ago for $1.3 million. Today, the real estate Web site Zillow.com estimates the value of Smith’s home at $981,000, slightly below the $1 million he still owes on it.

    Smith said he went from “making a lot of money to making hardly any” as the national and California economies plunged into deep recession. He’s a salesman serving the hard-hit residential and commercial construction sector. On top of his hardship, Smith’s mortgage exceeds the limits for the HAMP plan.

    In late August, Smith signed and returned paperwork in a prepaid FedEx envelope to Bank of America that said it had received the contract needed to modify the adjustable-rate mortgage he originally took out with the disgraced lender Countrywide Financial, which Bank of America bought last year.

    The modification agreement shows that Bank of America agreed to give Smith a 3.375 percent mortgage rate through September 2014, and everything Smith paid between now and through 2019 would count as paying off interest. He’d begin paying principal and interest in October 2019, with the loan maturing in 2037.

    The deal favors the lender, but Smith, 55, jumped on it because it kept him in the home.

    Armed with what he thought was “a permanent modification,” Smith returned a notarized copy of the agreement and made subsequent payments on time.

    In return, he got a surprising notice from Bank of America saying that his house would be auctioned off on Dec. 18.

    “It looks like they’re trying to sell this out from underneath me,” Smith said. “My wife cries all the time.”

    After a Dec. 16 call from McClatchy asking why Bank of America wasn’t honoring its own modification, the lender backed off.

    “The case has been returned to a workout status and a Home Retention Division associate will be contacting Mr. Smith for further discussions,” said Rick Simon, a Bank of America spokesman. “The scheduled foreclosure sale will be postponed for at least 30 days to allow for review of the account in hope of completing a home retention solution for Mr. Smith.”

    The Center for Responsible Lending says such problems are common.

    “Everyone acknowledges that the system is not working well,” Calhoun said.

    15 Responses

    1. […] The Myth of Loan Mod’s Exposed (Neil Garfield’s Living Lies) 12/19/2009 “Kudos to investigative journalist Kevin Hall with McClatchy Newspapers for inserting himself into the so called “loan modification” process and exposing the farce that is being perpetrated on the American public in the article below. Why is this happening? Pretty simple, two reasons, first the fact is that in almost all cases where you have a mortgage that has been securitized, you the homeowner or you the lawyer representing the homeowner are not dealing with a party that has authority to modify the loan and second they NEED a default. One of the many missions of this site is exposing the truth, hence the name “Livinglies.” The reality is that they, the “pretender lender,” know the debt is unenforceable, the real party in interest is unidentifiable in most cases, and the title to the property has a cloud on it. […]

    2. We just found out the hardway what a joke this modification stuff is. Here is the kicker…the reason we were given that our mod was denied….(after paying for a year on our loan) “We make too much money to qualify for the obama modification, and not enough money to qualify for the lender modification!” What a big fat joke. Not only that, they never told us, sent us a letter, called, nothing. After months and months of them telling us everything was a go, they sent us back last months “cashiers” check, with no reason why. When we called, and finally got through to someone who would give us reasons, we were informed our house will go up for auction April 29..and oh they will be sending us a letter in 7-14 days leaving us 2 weeks to either come up with 30,000 bucks, or sell the house and find a new place to live! Thank you Mr. President for all your help!

    3. Sorry if this get’s posted twice…seems to be getting stuck “awaiting modification” I put an X in front of the link.

      Here is an interesting video concerning “Modification Fraud”

      xhttp://www.ireport.com/docs/DOC-367943#

      Here’s another one…the comment section has some down-right cruelty. Lisa. E made a great point. It’s about Divide and Conquer.

      xhttp://bostonherald.com/business/real_estate/view.bg?articleid=1220926

      Merry Christmas!

    4. Here is an interesting video concerning “Modification Fraud”

      http://www.ireport.com/docs/DOC-367943#

      Here’s another one…the comment section has some down-right cruelty. Lisa. E made a great point. It’s about Divide and Conquer.

      http://bostonherald.com/business/real_estate/view.bg?articleid=1220926

    5. Our MOD was plenty full of great lingo… like this;

      “in consideration of our willingness to enter into this modification, borrowers agree to presently release ________, _________ & their affiliates, subsidiaries, officers, directors, employees, investors, agents, attorneys and each predecessor and successor thereto from any and all claims, demands, actions, causes of action and liabilities, whether known or unknown, arising out of or in any way connected to the Loan, the Note, or other loan document. This release is effective upon your execution of this agreement and is not conditioned upon your satisfaction of the conditions required by this agreement.”

    6. Well of course the whole thing is fraud from top to bottom; welcome to the USSA where we proudly screw over our own citizens.

      AnyBank USA

    7. Amazing that just one of thousands of reporters has the courage to write a story about the loan mod fraud going on. I have personally heard of dozens of families including myself faxing in documents to get a loan mod and then getting foreclosure notices or even worse eviction notices while waiting for the bank to save us with a fake loan modification. Reading the part above about the insurance being paid only when the loan defaults says it all. If you need help now we can show you how to stop both evictions in CA and stop foreclosures in FL, CA, NY and NJ. Call Robert at 860-599-5557. God bless Neil Garfield and the few others working to fix this mess and do the right thing.

    8. Don’t modify–SUE! All foreclosures are fraudulent because ALL were “funded” by an accounting trick, i.e., the bank takes your promissory note and deposits it into an account within itself then gives your seller a “funding” CHECK that is slightly less than or equal to the amount of your note (i.e., nothing with inherent value–commodities, etc. changed hands; only pieces of paper).

      This maneuver balances the bank’s books AND allows them to make money NOT ONLY from the exorbitant interest they will extract from you (if they ever hold your note), BUT ALSO from the sale of your note. For a bank, the question about making a mortgage “loan” is not if they will profit from the “loan,” the question is only to what degree the “loan” will be profitable.

      That’s because the bank’s assets were never at risk throughout the whole “loan” process. They never loaned you any of THEIR money. They coerced money from you–in the form of a promissory note–then turned around and SOLD the money at a profit in at least two ways: 1) right back to you in the form of a mortgage “loan,” and 2) sold the note to a third party (Fannie or Freddie, another bank, etc.).

      That’s why you sue instead of modifying–it’s fraud from top to bottom. The entire system is built on fraud.

    9. Hilary,

      The bastards got my house from me ten months ago. Mine, and lots of others I know. Keep fighting the good fight for yourself, and for us.

      Steve
      99Libra@gmail.com

    10. I am hoping that is it Steve ty for your reply….Merry Christmas

    11. Hilary,

      If you want to give your attorney the benefit of the doubt, he may just be trying to establish for the court that you tried in good faith to work things out with your lender. Otherwise, he doesn’t get it and is just leading you down an alternative path of doom.

      Steve
      99Libra@gmail.com

    12. Why does my attorney have me trying to get a loan mod? Why did he tell me “they are seeing that trying to negotiate a loan mod with a principle reduction works better BEFORE going to court”…damnnnnnn

    13. This is the exact thing I see the guy whom I’m renting from going through. He is constantly asking me to fax docs over to his “lender” [Chase]. Often times they look like the same docs; probably are. I’m sure they “lost” his just like everyone else’s.

      When he first proudly told me that he was in the “trial phase” of a loan mod with Chase, I tried to explain the real truth behind the scam. It didn’t take long for him to shut me down. Screw him; I never much liked him anyway. Let him find out the hard way when one day he wakes up to an NOD taped on his front door.

      Steve
      99Libra@gmail.com

    14. Does it even matter anymore, if you have an attorney?
      It appears to me that the banks don’t care. They do not have to be held accountable to anyone. They can do whatever they want, how, when, or where. Maybe the reason that the mortgage meltdown is so hard to swallow, is because we have been taught to accept responsibility for our actions, be fair, honest and truthworthy and to have a good work ethic; and now this no longer applies . Pray for the future generations of the educated and hnest homeless.

      How sad.

    15. It’s a scam, that will continue untill the courts realize that pretender lenders hold out a carrot on a string, getting home owners to agree that a certain amount is “owed” on the mortgage, then reject the modification, that they are not able to modify in the first place

    Leave a Reply

    %d bloggers like this: