If you have ever tried working with a mortgage servicer to have a modification made on your loan, odds are you have experienced one of Dante’s levels of hell. The combination of terrible service, overwhelmed employees, and an ever changing federal mandate has made mortgage servicers the scourge of the financial community. And that is saying a great deal.
Now Bankruptcy judges are starting to take notice, which could lead to some interesting situations. The failure of mortgage companies and servicers to respond in a timely and ethical manner to customer inquiries is creating a stir in the bankruptcy courts.
While the onus is still on the borrowers to repay the loans, the banks also have a responsibility to follow through in a timely manner to let the customer know if the modifications have been approved, or that the paper work needs additional information.
Hopefully, as this Bankruptcy Judge has done in Arizona, the banks and servicers will be held accountable.
On Thursday, something happened. She questioned a Wells Fargo official about the bank’s lack of response — under oath.
The spectacle of a high-ranking banking executive being grilled by an ordinary homeowner was the result of an unusual decision by Judge Randolph J. Haines of the United States Bankruptcy Court to summon a senior executive from Wells Fargo to appear in Mrs. Giguere’s bankruptcy case.
At the hearing, Judge Haines made it clear that he was acting out of concerns about Wells Fargo’s mortgage modification practices generally.
“This is certainly not an isolated case,” he said. “The kind of story I hear from this debtor is one that I and other bankruptcy judges around the country are hearing over and over and over again.” via the NYTimes.com.
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It'll be interesting to see how these bankruptcies play out in the next few months.
The truth is the loan modification process is not working.
Our so-called government leaders in an attempt to show that they care and feel for the "little people" have come forth with a variety of loan modification programs. In truth VERY FEW people relative to the number of people in mortgage trouble have EVER been helped by these programs. The banks and lenders also "talk a good game" about how they want to help people but again in truth, it is just a PR shell game where some bank CEO wants to sound compassionate and understanding and then promises to streamline and quicken the process while there loan modification departments back hom lose paperwork, drag their feet, and generally make the process impossible.
I do not know what the answer is the problem but I do not that current system does not work, PERIOD. It is a total sham – one that the politicians and bankers are in together.
It’s not uncommon down here to here about people trying to work a short sale, only to be foreclosed on by a different department at the same bank.
Very interesting article. Maybe if we resolve this problem some of the liquidity problems in the market maybe lifted.
We all know how difficult it's been in this economy. The real estate market has taken a huge hit with record foreclosures, a failing mortgage industry and homeowners seeing their home equity disappear. Some homeowners are finding some relief by refinancing through one of the loan modification programs available for struggling homeowners. The current administration is heavily focused on keeping homeowners in their homes.
When the real estate market was good, many people were looking to get into home ownership and take advantage of the favorable lender environment. In another corner, many investors were buying up rental properties at record pace to capture the low interest rates, "zero downs", 100% financing and attractive ARM's not normally available for rental properties. And with so many baby boomers on the horizon, many were buying as second homes for their future, but using them as rentals for the short term. Of course, all assuming the market would continue to go up, equities would continue to rise and they'd have retirement funds in abundance.
Unfortunately this did not happen and many of these investors are now holding onto investment properties that have lost much of their value, have mortgages set to re-adjust at higher rates and are now becoming long term landlords.
Many have tried to apply for the same loan modification or refinance programs that are being offer to homeowners in their primary residence, only to find out that most of these programs do not apply to properties in the catagory of "investment properties", especially if the original financing terms were catogorizes as a "second home" and now the property is used as a rental.
Also if a second mortgage is attached to the rental it can almost be impossible to get the second lienholder to subordinate and allow the 1st mortgage to be modified. Nor would it be easy to get the first lienholder to consolidate 1st and 2nd mortgages together as this would most likely cause an upside down mortgage (over 100% financing).
As a result there are not many options for a property investor other than to try and stay afloat and hope their tenant never moves out. Or lose your property to a quick sell (hoping to break even), a short sale or worse foreclosure.
To me it's interesting this administration hasn't given much thought to the needs of property investors, as this group of people are not only helping the economy by offering affordable housing to many that have lost their homes, but also to the fact that these investors create many jobs in the building industry, supply income to the state and city by way of property tax revenues, banks, tradesmen, carpenters, real estate companies and property management companies.