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Borrowers Find Obstacles to Converting Trial Loan Modifications to Permanent

December 7, 2009

As Placentia loan modification attorneys, we were disappointed but not surprised to see that problems with loan modifications don't end after customers manage to get one. The New York Times reported Nov. 29 that the Obama administration's Home Affordable Modification Program, which seeks to improve the housing market by stopping preventable foreclosures, is seeing problems when borrowers try to finalize their temporary modifications into permanent ones. The article focused on Queens homeowner Yolanda Thomas, 35, who won a temporary modification after she was laid off an forced to take a lower-paying job. But due to another job change and a series of conflicting communications from her lender, Thomas is now being asked to start another trial modification.

Thomas originally had a forbearance arrangement with Chase, which bought her mortgage holder, Washington Mutual. After she found a job at roughly half of her previous pay, she also won a trial modification that cut her mortgage payments by more than half. That deal, struck in June, was supposed to become permanent if she made all her payments on time and submitted the right paperwork. The trouble started in July, when Thomas began receiving threatening phone calls from Chase collection agents, who said she was still on the hook for the original, higher mortgage payment. Despite the loan modification, Chase reported her to credit agencies as delinquent. One letter she received from the bank apologized for the mistake, but a spokesman for the bank said that letter was itself a mistake -- that Chase does consider her delinquent.

When the trial modification ended in October, Thomas hadn't heard from Chase, so she sent in a fourth payment at the same rate. Later that month, the bank told her that she had been denied a permanent modification based on her income -- from the same job that formed the basis of the trial modification. Two days later, she received a letter saying she was still being considered, but needed to submit a tax document. A phone call following that said she needed to start over entirely by applying for a new trial modification. In the meantime, Thomas has managed to get a higher-paying job -- but she is no longer sure that this will help her hold on to her home. The Chase spokesman told the Times that Thomas is a loan modification success story because she's better off than she would otherwise have been.

Our Diamond Bar loan modification lawyers agree that Thomas is probably better off because of her participation in the trial modification program. However, we strongly disagree that the lesser of two evils rates as a success story. If the facts reported here are true, Chase has, at the least, a failure to communicate between its own branches, as well as with this customer. Given what we have written here about the financial incentives for banks to make loan modifications, this behavior could also be intended to delay a loan modification as long as possible, to drive Thomas into a more-profitable foreclosure. This is a senseless policy when faced with a client like Thomas, who is willing and able to pay her mortgage. At least part of these actions -- the false report to credit agencies about delinquent mortgage payments -- is also illegal.

Howard Law LLP has an active practice helping clients in California wrangle loan modifications out of loan servicers that seem reluctant to grant them. As Temecula loan modification attorneys, we have heard many stories similar to this one from borrowers frustrated by bureaucracy, miscommunication and mistakes at their loan servicers. We have had success cutting through that red tape and winning loan modifications even in cases where the clients had no luck on their own after months of trying. We believe banks pay attention when we call because we are attorneys, and they know a lawsuit may soon follow. In fact, we routinely review our clients' files for evidence of predatory lending, credit reporting violations or other illegal behavior, and we absolutely will file a lawsuit if necessary to protect our clients' rights or stop an unfair foreclosure.

If you've tried for months to get a loan modification -- temporary or permanent -- and you still haven't received a straight answer, you should call Howard Law as soon as possible. To set up a free, confidential evaluation of your case, you can reach us at 1-800-872-5925 or contact us through the Internet.