by Brian Mahany
Almost every day we are contacted by a potential client who was denied a HAMP mortgage modification. For those unfamiliar with HAMP, the program’s formal name is the Home Affordable Modification Program. The program was part of the stimulus bill in 2008. When Congress gave billions to Wall Street and big banks through the TARP program, it required $50 billion to be set aside to help homeowners who were struggling to keep their homes. The program helps lower monthly payments through lower interest rates, principal reduction or extending the length of the mortgage.
Banks have done a horrible job in letting people know of the program and with helping them modify their mortgage. Thats puzzling since a good lender would rather have someone in the home paying monthly than have another empty, vacant non-revenue producing property. Homeowners who are denied a modification may be able to sue in certain circumstances but there are many mistakes they make that could keep them from getting a modification.
Some of the common mistakes we see are as follows:
1) Failing to keep good records. The key to winning a suit against a lender is good documentation. Keep every letter, record or at least log phone conversations and take good notes. By being prepared for a lawsuit, often you can force the lender to keep their word on modifications. If the bank knows you have documented everything, you may not even need to go to court.
2) Don’t assume that everything you are told is the truth. The training received by many bank workers handling modifications varies widely. Some workers are good while others routinely give bad advice. If it wasn’t for the recordings given to us by clients, we would have never believed many of the things we were told that the lender said.
Bank employees routinely tell people to miss payments in order to qualify, promise that if they make 3 trial payments they are “guaranteed” a modification and tell them they are approved when they are not. Often this advice is just plain wrong.
3) Banks don’t like HAMP (although they should) and will often use any excuse to get out of a modification request. Because the application process is fairly paper intensive, make sure you provide everything they ask for. Everything – even if the request sounds silly. Failure to provide the required application materials is automatic grounds for rejection. That means providing everything instead of 99.9% of what they ask.
4) Another mistake is believing the promises you hear on the phone. If someone tells you that you are qualified or your application materials were received, ask them to confirm that in writing. Otherwise it is your word versus theirs.
5) Another common mistake is failure to follow up. After 90 days, underwriters can reject the application or require new verification documentation. Although banks are supposed to process all applications on a timely basis, they don’t. As the old adage goes, “the squeaky wheel gets the grease.”
6) More of a misconception than a mistake, some homeowners believe they are entitled to a modification as a matter of right. The entitlement mentality might work for some things but it doesn’t for HAMP. There are guidelines and if you don’t meet them, you don’t get your loan. Don’t waste your time fighting if you don’t qualify. Find out if you are eligible for a different program instead of wasting time on a dead end.
7) That being said, don’t just take the lenders word if you are rejected. Underwriters frequently make math mistakes, improperly compute net income and often botch applications from self employed homeowners. You can and should appeal.
8) A tragic mistake is to believe that because the servicer is considering your HAMP application, a foreclosure sales won’t take place. A HAMP application does not automatically stop foreclosure in most jurisdictions!
Read that sentence again. HAMP does not put your foreclosure on hold. Make sure that any sale or court dates are extended if you are in the middle of an application. Do not depend on the bank to do this automatically.
9) Finally, remember there is a difference between the servicer (the one who collects your payments) and the investor that holds the mortgage. Understand who does what and who is authorized to modify your mortgage.
Even if you do everything correctly, there is still a chance that your servicer will lose your paperwork, improperly deny your modification or still proceed with a foreclosure. That’s when a good lawyer is critical.
Although not every state has recognized the right to sue for denial of a HAMP, many do. Banks have paid hundreds of thousands of dollars to settle individual cases (and almost always on a confidential basis.) The bottom line is that banks do not do well before juries these days. Most potential jurors know someone who was ripped off by a bank or loan servicing company.
If the bank handles the process properly, modifying a mortgage through the Home Affordable Modification program is not difficult. (Time consuming, yes.) A lawyer usually isn’t needed. If you find yourself fighting daily with the bank or facing a looming foreclosure sale even though you submitted a HAMP application then it is time to call a lawyer.
The mortgage fraud lawyers at Mahany & Ertl have helped many homeowners through the United States. We are not a foreclosure defense or bankruptcy firm. We sue banks… sue them for wrongful HAMP denials, for predatory foreclosure practices and for fraud. If you think you were defrauded by a bank, give us a call.
For more information and to better understand your rights, contact attorney Anthony Dietz at Need immediate help? Contact the author at (414) 704-6731 (direct). Please note, however, we cannot take cases where there is a sale or court date coming up right away. For those cases, find a local lawyer through your county or state bar association lawyer referral service.
All inquiries are kept in strict confidence.
Mahany & Ertl – America’s Fraud Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine & Minneapolis, Minnesota. Legal services available in many jurisdictions. In a few jurisdictions we may refer your case to another lawyer but only with your consent.