Are You in Loan Modification Hell? Join the Club.

UPDATE: New rules regarding HAMP loan modifications went into effect June 1, 2010, including new income requirements. And, the Loan Modification Hell Horror Stories continue.
UPDATE 2: Check out my latest post: Loan Modification Hell: New Solutions To Avoid Losing Your Home.
UPDATE 3: Let the lawsuits begin: Loan Modification Hell Lawsuits

Are you in loan modification hell?

Has your application for a loan modification been stonewalled?
Do you find yourself waiting by the phone week after week, hoping to hear something from your lender?
Are you continually asked to provide the same information over and over?
Has your loan modification application been rejected because you failed to provide information you were never asked for?

Bobbi Giguere was in loan modification hell, courtesy of her lender, Wells Fargo. In a story that's becoming so commonplace it's scary, she filed for bankruptcy to deal with her financial trauma (job loss and impending divorce). Even after months and months of waiting, and after submitting her paperwork three times, she never heard from Wells Fargo about her loan modification application.

The bankruptcy judge, Randolph J. Haine, was fed up and ordered a Wells Fargo senior executive to appear in court so Ms. Giguere could question someone face-to-face about her loan modification. Turns out, she was rejected because Wells Fargo said she failed to submit a financial worksheet - a document that Wells Fargo never requested, Joseph Ohayon, senior vice president of Wells Fargo Home Mortgage Servicing, admitted under oath.

In the New York Times story, Judge Haine says that he and his fellow bankruptcy judges are seeing more people file for bankruptcy to avoid foreclosure. But that isn't helping those who want to get their loans modified.

Martha (who asked that I not use her last name because she is continuing to try to negotiate a loan modification with her big box lender), has also been in loan modification hell for the past few months. She contacted me about a month ago, wondering if the "trial period" loan modification she had been offered was real. I told her that lenders only offer trial modifications - and after you've paid on time for three months, that trial modification is supposed to be made permanent.

(I've been hearing from a reader who has been in a trial modification for five months and was been told to keep on making more trial loan modification payments because the big box lender is too busy to do make the trial loan mod permanent.)

I told Martha to stay in touch with her lender, calling back daily if necessary to prod them into action.

After hearing nothing for a month, she started calling her lender only to find out that her loan modification application had been canceled because of incorrect information (not supplied by Martha). They claimed she was no longer living in her property, which Martha says isn't true.

At this point, I feel like the mortgage company is using this delaying tactic as a means of getting as much money out of us as possible prior to lower our payment. A very unethical practice, in my opinion, though I doubt that it's illegal," Martha writes. "In the meantime, our financial situation becomes more stressful every day. We're using credit cards for things we never used to use them for, such as gas and groceries, and they're maxed out at this point. I'm sure other people are having the same experience. I guess I just would like to know if there's something else I can do or someone to complain to."

I have been in touch with senior-level officials at the Treasury Department who acknowledge that the loan modification program isn't going exactly as planned. They suggest if you're having problems getting your lender to finalize your loan modification, you should contact the Treasury Department directly to complain if your lender is a national lender. You should contact your state banking and finance regulator for a state-chartered institution.

If you want your case to get elevated, you'll need to provide them with the following:

Copy of your loan application paperwork and all documentation you've submitted to your lender. It's best if you scan a copy of what you're sending before you send it so that you have an exact duplicate.
Keep a paper trail of everyone you have spoken to at the lender. Get the employee's name, employment identification number, and note the date and time of the call. Be sure to summarize what was discussed, including any steps you were asked to take (such as supplying additional information).

Be sure to stay in touch with your lender about your loan modification. Call daily or every other day. You need the lender to realize that you're not going to give up and that you expect action.

And hopefully, if you're in loan modification hell, you'll find a way out.

If you're in loan modification hell, please share your story. I know from my email that there are some very high-powered people in the real estate industry who will see it here.

Ilyce R. Glink is the author of several books, including 100 Questions Every First-Time Home Buyer Should Ask and Buy, Close, Move In!. She blogs about money and real estate at ThinkGlink.com and The Equifax Personal Finance Blog, and is Chief Content Strategist at RealtyJoin.com, a community for real estate investors.

Ilyce Glink

Ilyce R. Glink is an award-winning, nationally-syndicated columnist, best-selling book author and founder of Best Money Moves, an employee benefit program that helps reduce financial stress. She also owns ThinkGlink.com, where readers can find real estate and personal finance resources.

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