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Homeowners Continue to Go Into Foreclosure Because of Bank Miscommunications

May 7, 2010

As Rancho Cucamonga loan modification attorneys, we were interested to see an article outlining how homeowners are still losing their homes because of poor communications from and within their banks. USA Today ran a ProPublica report May 5 outlining how homes end up foreclosed by one arm of a lender, while another arm is offering the borrower a loan modification in an attempt to keep the loan alive. This happens even to borrowers participating in the Home Affordable Modification Program, which explicitly forbids lenders from auctioning off a home while they are still deciding whether to grant a modification. Advocates for borrowers believe this has resulted in multiple avoidable foreclosures, and called on the Obama administration to penalize violators. Lenders and loan servicers say mistakes are rare and happen because their loss mitigation departments are overwhelmed by applications.

The article went into detail about a mistaken foreclosure on the Hill family's home in Lexington, S.C. Michael Hill fell behind on his mortgage payments in early 2009 and spent months trying to get a loan modification from JP Morgan Chase. He had no luck, and on April 2 of that year, Chase filed to foreclose on the Hills. But on August 6, Chase also referred Hill to a housing counselor who helped him apply again for a loan modification. Despite the pending modification decision, the home was sold at auction, and the Hills received an eviction notice November 5. Six days later, Chase called to tell Hill that he was granted a modification.

The Chase representative was surprised to learn from Hill that the home had already been foreclosed and sold. It paid extra to buy the home back from the auction's winner, and Hill was once again enrolled in a trial loan modification under HAMP. However, he said, the bank has continued to contradict itself about whether the trial modification is approved to be made permanent, and he's still waiting for a final answer. His family is living with belongings partially packed, in case of another foreclosure.

According to the article, one contributor to the problem is the fact that different departments within the same company handle foreclosures and loan modifications. Sometimes, those departments simply don't communicate with one another. To make matters worse, many lenders will hire an outside attorney or trustee to handle the legal aspects of the foreclosure. A spokeswoman for the Mortgage Bankers Association added that loan servicing employees are overworked because of the large volume of loan modification requests.

As Gardena loan modification lawyers, we are not impressed with that argument. The foreclosure crisis is well over a year old, which has given banks more than enough time to hire the extra staff they need to process the flood of applications. In fact, because unemployment is high, lenders would likely be able to hire that staff quickly and relatively cheaply. As we have written here before, we believe their behavior shows that lenders and loan servicers really want to modify loans, possibly because they believe they will lose money by doing so. The result, as this article shows, is unnecessary stress, miscommunication and financial expenses for homeowners.

Howard Law PC helps homeowners throughout California negotiate for a loan modification. We are proud of our record of successful modifications, which include changes to loan structure and principal write-downs as well as changes to interest rates or loan maturity. We believe our success is at least partly attributable to the fact that we are Murrieta loan modification attorneys, because lenders pay attention when they see that an attorney is calling. We understand our clients' rights and legal options, and banks know it. In fact, we can and will file lawsuits against banks if we find the type of severe negligence described in this article, or predatory lending violations. However, our goal both in and out of court is to reduce our clients' monthly payments to a reasonable, sustainable amount of money.

If you're tired of contradictory, confusing and misleading behavior by your lender, you should call Howard Law for help. To set up a free consultation, please call us toll-free at 1-800-872-5925 or send us a message online.