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Mortgage Lenders Still Require Homeowners to Stop Paying Before Offering Loan Modifications

August 19, 2009

Despite federal rules that explicitly say it's not necessary, homeowners continue to report being instructed to miss mortgage payments before they are offered a loan modification, McClatchy DC reported Aug. 16. The story came after the Obama Administration began its "name and shame" campaign to encourage mortgage lenders to increase their efforts to make loan modifications under the Making Home Affordable plan. The campaign was launched after the Treasury Department met with lenders participating in the program, finding that just 9% of eligible mortgages had been modified despite estimates that 2 to 4 million homeowners are eligible. In response, the newspaper said, it received a flood of anecdotes from homeowners who say they've been promised loan modifications they never received and given the runaround by lenders -- including advice to harm their credit by stopping mortgage payments before they're eligible for help.

The article told the story of Riverside homeowner Cynthia Steigner, 51, who bought a house eight years ago with a conventional fixed-rate, 30-year mortgage. After she lost her job, she contacted her lender -- the defunct IndyMac bank, which is now OneWest Bank -- and was told she must be four months behind before it would consider a loan modification. She did what they asked, but still didn't get a loan modification and ended up filing for personal bankruptcy. After she was through the process, OneWest contacted her on its own initiative to offer a loan modification.

She completed the paperwork and sent a payment to start her new payment plan -- but the bank said her payment had to be with a cashier's check rather than a bank draft. When she re-sent the payment as requested, OneWest said the offer had expired and refused the loan modification. OneWest foreclosed on her home but pulled it out of auction when McClatchy called. Its outside spokeswoman said the deal was denied because Steigner didn't returned signed paperwork, but her attorney flatly denied this and provided copies of the signed paperwork and the receipt from shipping it. The bank said her case was under review.

After reading numerous stories like this and helping hundreds of California homeowners in similar situations, our Bellflower loan modification attorneys have concluded that lenders are not really interested in providing loan modifications. Despite the high cost of foreclosures and the depressed resale market, they continue to stonewall borrowers who apply in good faith; deny loan modifications for eligible borrowers; and advise them to stop paying their mortgages before they're willing to even consider helping. This last problem is particularly insidious because it encourages borrowers to destroy their own credit, substantially reducing their chances of becoming homeowners again in the near future. This is not just an irresponsible and cruel way to treat customers who rely on their honesty; it also causes real damage to borrowers' finances and personal lives.

Anaheim-based Howard Law LLP has an active practice helping borrowers secure loan modifications, even from lenders that have made those modifications very difficult to get. Our Rancho Cucamonga loan modification lawyers have a good record of securing loan workouts for clients -- successes that we attribute to the fact that we are attorneys. Banks listen when our San Diego County loan modification attorneys call, because they understand that a lawsuit may not be far behind. In fact, we start every case by examining the client's record for evidence of predatory lending or other unfair dealings -- and if appropriate, we are not afraid to sue in order to make sure your rights are respected.

If you're facing default or foreclosure on your home and your lender isn't responding to your messages, you should call Howard Law for help. We offer free, confidential consultations to all potential clients and can take action right away if your home is threatened. To set up a free meeting, please contact us online or call toll-free at 1-800-872-5925.