The False Hope of Mortgage Modification

Big Bank Mortgage Lenders have done it again.  Just when you think you have heard it all, they figure out a way to cheat homeowners AGAIN.  You have been warned many times by the authorities and consumer advocates to beware of “foreclosure rescue” scams, i.e. a person or business that promised to help you save your home for a fee.  In foreclosure rescue scams, homeowners under great financial stress and out of the fear of possibly losing their home fall victim to these predatory folks who often abscond with the homeowner’s money and sometimes the very home they were trying to save.  Now we have a new twist in the save your home rescue scam landscape.   This time it’s the false hope of mortgage modification offered, not from fly-by-night operation, but by big bank mortgage lenders in their role as “mortgage servicers.”

We all remember when hundreds of billions of dollars were given  by American taxpayers to the five largest banks. These taxpayer funds were given under the Troubled Assets Relief Program (“TARP”) including $45 billion to Bank of America alone. It has been reported that Bank of America was provided an additional guarantee by the United States Treasury of up to $100 billion. In exchange for these billion dollar bailout funds, the Big Bank lenders, in their role as “mortgage servicers” were to offer assistance to under water borrowers, modifying their loans to make payments affordable. The Big Bank Mortgage lenders agreed to be paid money to modify loans OWNED in almost every case by federal agencies, in other words, OUR government.

On April 17, 2009 Bank of America signed a Servicer Participation Agreement requiring the bank to use “reasonable efforts” to modify mortgages under the Home Affordable Modification Program (“HAMP”).    Bank of America also promised to dedicate adequate resources and properly trained employees to focus on honest and prompt treatment of modification requests. According to a federal lawsuit filed by a former Bank of America insider, Bank of America could make more money by foreclosing on homes than by offering loan modifications and hatched a scheme to prevent modifications and increase foreclosures. The federal suit alleged that high level bank executives deliberately set up a system to pretend to comply with its obligations under the Servicer Participation Agreement and HAMP, while secretly it intended to deny the vast majority of modifications.  The whistleblower lawsuit further claims that Bank of America, the nation’s largest mortgage servicer did not enter into the Servicer Participation Agreement in good faith because it knew that every successful HAMP modification for a homeowner would result in lost profits to the bank. Instead, the bank developed an elaborate scheme to force down the number of successful HAMP modifications while allowing through a modest number of modifications in order to avoid scrutiny or government action.  The fraud scheme included:  1) delaying and denying modifications claiming documents received from borrowers had been “lost” or never received  2) fraudulently concealing an electronic document image repository  of borrower documentation so that it could falsely deny receipt or claim incompleteness even after getting the documents it requested; 2) deliberately deceiving homeowners who complained about  the banks mishandling of their HAMP inquiries and submissions, with efforts to keep borrowers from HAMP eligibility; 3) intentionally forcing homeowners to wait months before a response to HAMP eligibility determinations (such delay resulting in HAMP “ineligibility”) and failing, by design, to communicate HAMP concerns to homeowners, including deadlines, incomplete records, modification status, risk of losing eligible status, or other concerns: 4) unlawfully proceeding with foreclosure actions (under “dual track” protocols) while homeowners were under review for HAMP eligibility or during a payment period; 5) failing to properly credit homeowner HAMP payments during the Trial Period, resulting in improper denials of permanent HAMP modifications; 6) failing to convert eligible HAMP homeowners from Trial Period status to permanent modification status and ;7) failing to give actual authority to BANA employees and contractors to properly resolve escalated complaints.  Bank of America settled the Whistleblower lawsuit for a secret amount and its willingness to do so is telling.

What appears to have happened is that Bank of America, following its four billion dollar purchase of Countrywide Home Loans, turned its Countrywide mortgage lender’s into “Bank of America modification specialists.” The very same people who created the mortgage mess by making risky, poorly documented and in some case fraudulent loans are the same people who are now responsible for reviewing modifications for completeness and compliance with modification requirements.

Reports from homeowners and consumer advocates indicate great frustration and the feeling of hopelessness due to delay and denials of legitimate modification requests. If you find yourself in this situation you should be aware that the burden is upon you to prove exactly what you did, who you spoke with, what was said, when it happened and what documents you provided and when. You should keep records and recordings of everything you do, including proof of mailing and receipt of all communications. For more information, visit