Hooray! Bank of America (BAC) is lowering your mortgage payments, which means you'll get to keep your house. Or maybe not: Many homeowners report that the financial giant is moving to foreclose ever after it granted them a permanent loan modification under the federal government's main anti-foreclosure initiative.
Take this Los Angeles resident, who is part of a class-action lawsuit alleging that B of A and one of its subsidiaries flouted rules governing the Home Affordable Modification Program:
It seemed Maria Campusano's financial problems were behind her when the mortgage on her Victorian home in a Massachusetts mill town was chopped by hundreds of dollars a month.
She soon learned that her troubles had just begun. Weeks after making her first payment under the new rate, the school district staffer began receiving past-due notices, documents showing wildly inaccurate loan balances and letters threatening foreclosure. She now fears she'll lose her home.Same 'ol same 'ol
Such stories are depressingly common. A Connecticut housing rights organization found that among borrowers who had received a loan "mod," nearly a quarter continued to wrestle with their lenders over problems ranging from faulty default notices to mistakes in their loan balances. Banks -- which are paid under HAMP to offer mortgage relief -- routinely ignore their own modification agreements.
As a result, homeowners under the impression that they have staved off foreclosure, often after months or even years of jumping through hoops to participate in the program, are blindsided. Mortgage payments mysteriously vanish. Borrowers are wrongly thrown into default, damaging their credit records. Lenders ladle on late fees. One day people are told their loan mods are in order, the next they're getting threatening letters from bank attorneys. Lawyers involved in the litigation against B of A even claim that some bank "loan mitigation" personnel have gotten paid extra for collecting more in mortgage payments than what is permitted under a modification agreement.
B of A, the nation's largest mortgage lender, is among the worst offenders when it comes to offering modifications, but it is by no means alone. The Treasury Department recently documented a slew of errors by major loan servicers in fining B of A, JPMorgan Chase (JPM) and Wells Fargo (WFC) for their desultory performance under HAMP.
What's going on here -- incompetence, willful foot-dragging, contempt for the rule of law? All of the above. Four years into the foreclosure crisis, no one (not even bankers, if you catch them in a private moment) think banks are doing a good job working with struggling borrowers. Yet there are no repercussions. B of A CEO Brian Moynihan reaps fat bonuses, even as the company undermines state efforts to fight foreclosures. The feds feign helplessness.
Meanwhile, the band plays on:
Julie Lewis, a 53-year-old mother of four, modified her contract with CitiMortgage for her Staten Island, N.Y., home after getting a divorce and suffering injuries in a car wreck that kept her from working. In October 2010, after accepting her modified payments for more than a half year, CitiMortgage told her the modification had been denied, according to documents filed as part of a federal lawsuit in New York.
Bank agents now visit her street to take pictures of her home or hang fliers on her doorknob demanding that she call to discuss purportedly late payments.The point here isn't that such conduct is unethical (although it is) -- it's that it is unnecessary. By the banks' own determination, such borrowers have been deemed worthy of a loan mod. In principle, that's good for everyone. Homeowners keep a roof over their heads; banks and mortgage security investors cut their losses; communities avoid foreclosure, which benefits property owners and other taxpayers. And mods stanch the bleeding in the housing sector, boosting the economy.
Instead, we get rank ineptitude and empty promises by B of A and other servicers to do better. Pitiful.
Thumbnail from Flickr user Finger Food
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