For all of you who stressed, strained, fretted, wheedled, worried, fought, kicked, and even gouged to finally wrest a loan modification from the lender/servicer that controls of your home loan, I have a message.
The fight may not be over.
“We Don’t Have Any Record of Your Loan Modification.”
I’ve seen and heard dozens of different variations on this theme. When my law partner and I see more than 2 or 3 unrelated clients with the exact same fact patterns, we know that the problem is massive.
We’ve seen scores of homeowners with the exact same problem. It’s the same despite the fact that they are dealing with different lenders in different parts of California and out of state.
The themes for this horror-story fall into at least two different categories.
The Train Never Was on the Track
This nightmare unfolds with the homeowner working with an endless stream of disappearing parties “representing” the lender/servicer who require the same documentation to be sent in ad infinitum. Finally they inform you in writing that you have a loan modification. The documents are sent to you. (Often as not, with the cutoff date for returning the signed documents having already expired by the time you get them.)
You send the loan mod back fully executed in the overnight parcel designated by the lender/servicer for this purpose.
Prior to that there is typically NEVER a street address where the homeowner can send documentation and they are forced to use a FAX.
There is a reason for this we will deal with in my next article.)
You make your payment(s).
And you wait…
And you wait…
And you wait…
Perhaps thinking you’ll get a monthly statement?
YOU CALL THE LENDER/SERVICER. Upon reaching yet another person you’ve never spoken to before he/she gives you a series of positively bizarre instructions about how and where to send your payments “while the modification is being implemented.”
I’ve seen homeowners told that they HAD TO USE WESTERN UNION to wire the funds to the lender/servicer each month. This went on for 11 months.
Another lender servicer INSISTED THE HOMEOWNER USE SPEEDPAY. (That homeowner had to pay a $10.00 SERVICE CHARGE FOR EVERY HOUSE PAYMENT SHE MADE.)
BEWARE: If you think you have a loan modification, and the lender/servicer is directing you to make your house payments in some bizarre fashion other than direct withdrawal from your bank, or by the sending in your payment by check, something is most likely seriously wrong and your loan mod.
In all probability the mod has not been implemented in the lender/servicer’s system.
BEWARE: If after several months you are not getting updated monthly statements that clearly show you have a modified loan, it is very likely the train never got on the track. Your loan mod was never uploaded into the lender/servicer’s system.
The final straw comes when you’re told to reapply for a modification, or told that the modification you thought you had, was only temporary and now you need to apply for the “permanent one”.
Sometimes they will even attempt to play “Pollyanna” as described in detail below. (But know this: The loan mod you actually get (if you ever get one) will very likely be worse than the one you “had”.
That is, the nex loan mod will be much more expensive for you, the homeowner.
The Train Derails On Purpose
This one is really awful. It hurts me personally as an attorney to see the severe emotional and financial trauma this causes homeowners.
Most homeowners are keenly aware that they “had something” and that now somehow, they’ve lost it.
Many think the “loss” of the loan modification they had is or must be THEIR fault. Often this nightmare takes homeowners to the very brink of foreclosure or the out-and-out loss of their homes. The vast majority never recover their homes if they lose them.
What To Do With A Trainwreck
When The Servicer Changes
This is VERY important! If you have signed a loan modification agreement with a lender/servicer and during the modification process, immediately after, or within a few months after, the lender/servicer transfers your home loan to another lender/servicer, YOU MUST TAKE ACTION IMMEDIATLEY.
The odds are quite good that your loan modification train will “derail” or has already.
If the new lender/servicer absolutely refuses to send you written confirmation that they are aware of you modification and are implementing it into their system, you are in SERIOUS TROUBLE.
DEMAND THIS IMMEDIATLEY IN WRITING. Send your demand via overnight mail with proof of receipt and include the copy of the loan modification that you have signed.
Your Telephone is Not Your Friend
Typically, neither the prior lender/servicer nor the current lender/servicer will actually assist you on the phone, though they pretend to do so, (even after you send them a copy of your signed loan modification.)
Instead they will often play “Pollyanna”. They express confusion, shock, awe, mock sympathy, but most often, an out-and-out aggressive refusal to recognize that you have or had any loan modification.
REMEMBER! You are not the first person who has come to them and told them you have a modification.
Hundreds if not thousands of people have been where you are. They’ve all said and done exactly what you are saying and doing, but the lender/servicer will ACT as though this is a completely new, utterly novel issue they’ve never seen before. (Courts and judges will also treat you as a worthless deadbeat if you give them the slightest chance/excuse to do so. Just ask thousands of homeowners who came to them for help and lost everything.)
It Ain’t So
Incredibly lender/servicers often have a written “script” they are required to follow.
It is literally written down, and they must respond according to the written “script”.
We’ll see why in my follow-up article .
The Action Plan
Once you have clear indicators that your current lender/servicer is denying the existence of your loan mod, (or refuses to confirm it in writing) do the following:
1. ALL communication(s) must be in writing. Use OVERNIGHT MAIL WITH PROOF OF RECEIPT.
2. If you insist on using the phone, ask for permission to record the calls. (They will invariably refuse.) Once they refuse, send written confirmations of EVERY phone conversation to the lender/servicer via overnight mail with proof of receipt, and ALWAYS DEMAND that your loan modification be implemented IMMEDIATLEY.
3. They will typically begin to assess late payment penalties and claim your payments are inadequate, or were never received. Send your modified loan payment overnight mail with proof of receipt. DO NOT STOP sending your payments because of anything they say. If you stop they will later claim that you breached any loan modification you claim to have. Do not allow them to initiate foreclosure proceedings. If they do file a notice of default, DO NOT ALLOW THE SALE OF YOUR HOME TO GO TRHOUGH.
4. YOU ARE FIGHTING WAY OUT OF YOUR WEIGHT CLASS. Get an attorney immediately! If you think you can reason with these people, you can’t. If you think you’re smarter than they are, that may be so, but they have the power to sell your house while you’re pointing to your advanced degrees on the wall. If you think the system will “naturally” vindicate you, you are wrong. State and federal courts have given shameful obsequious, fawning deference to lenders for years. This has allowed the financial murder of millions of Americans to occur while the courts looked on with righteous indignation. (This judicial attitude has changed only slightly and only recently.)
The “vanishing loan mod tactic” has and is being used nationwide. Legal representation and in some cases, filing a bankruptcy petition are needed to bring the lender/servicer to bay. If any attorney tells you he/she can fix this with a letter, he/she is likely foolishly inexperienced or wildly over optimistic. Pollyanna again.
But it can be fixed.
Plan on a real fight and plan on going to court if necessary. Lender servicers have taken untold numbers of homes precisely because homeowners can’t believe what is happening to them and wait too long to act.
Believe it and be ready to continue fighting.
Guest author Bill Purdy is a tax and real estate lawyer with Simmons and Purdy in Soquel, California. He and his partner Pam Simmons are my go-to resource for all matters of tax and mortgage law. I’m tickled to share Bill’s pointed perspective on California mortgage law.
© By William Purdy