When loan modification programs began rolling out, first during the Bush Administration (the HOPE) program, and next with the Obama administration Home Affordable Modification Program (commonly referred to as HAMP), there were high hopes that modifying loans would stem the rate of foreclosures and would provide much needed relief to those who seriously needed help to stay in their homes. It was hoped these programs would stop the precipitous drop in home values across the country.
The modifications were never intended to lower rates or payments for those who were not dealing with a financial hardship, which is why a "hardship letter" is one of the required pieces of paperwork to qualify for a modification. Some banks have truly reached out to help home owners in need, which largely includes people who have experienced a reduction in income (due to job losses or reduction in pay or hours)or have had to deal with ARM (Adjustable Rate Mortgage) rate re-sets which resulted in significantly higher payments.
Bank of America has a dismal record of assisting home owners. They have offered one excuse after another for their failures, but the bottom line is their system is wrought with issues that are not acceptable, either to those trying to get a modification, nor to regulators who are investigating the complaints against the bank.
Initially Bank of America ignored the guidelines about debt ratio, and denied modifications citing "too much income" even when debt ratios were above 60%.
Even today, IF a home owner is told that they qualify for a modification program,the borrower receives nothing in writing from the bank about the terms of the trial modification, or the final modification terms. Borrowers are expected to call in payments monthly, with no way to track where the funds have been applied. The bank continues to call these same homeowners, basically harassing them, and sends out notices of intent to foreclose, in spite of collecting trial modification payments. In addition, they continue to report delinquencies to the credit bureaus for payments received. There have even been cases of foreclosure auctions taking place on homes when the home owners were paying trial modification payments.
Some states are taking action against Bank of America to force them to be accountable to the people. The state of Florida Attorney General reports that his office has spent approximately $4 million over the last two years just investigating complaints and trying to help home owners. One South Florida mayor has announced that he wants his city to reconsider doing any business with Bank of America.
The issue regarding loan modifications and mistreatment of home owners has gotten so bad that state and federal regulators are investigating all complaints to determine how many people have had modifications denied who were actually eligible. The U.S. Treasury Department has begun auditing all lenders now.
If you believe you were erroneously denied a modification, or were otherwise mistreated during a modification attempt, perhaps you should join the masses and file a complaint with your state regulators.
Since the economic crash began, Bank of America has had class action lawsuits filed against them in several states for issues dealing with credit card fraud, racial discrimination, and of course, failure to deal in good faith with home owners in need of assistance.
For their part, Bank of America is finally stepping up and starting to actually modify loans. Is this a case of "a day late and a dollar short?"
Written by Shelby Bateson