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Wachovia Mortgage Borrowers Locked Out of Participation in Federal Loan Modification Program

October 9, 2009

As Whittier loan modification attorneys, we were disappointed to see a recent article exposing mortgage lender Wachovia as unwilling to even participate in the federal Making Home Affordable Program. According to an Oct. 7 article from Dow Jones, Wachovia has told at least one San Diego homeowner that it's not taking applications for the government program, which provides incentives to both borrowers and lenders to modify the loan and keep the borrower out of foreclosure. A representative told homeowner Richard Bell that Wachovia's computer systems are not yet set up to handle applications for Home Affordable Modification Program, which was announced in March and slightly changed later that spring.

Through August, the article said, Wachovia has modified 2%, or about 1,800, of loans held by eligible borrowers. By contrast, Morgan Stanley's Saxon Mortgage Servicing has modified 39% of eligible loans through HAMP, and even Wells Fargo, which owns Wachovia, has modified 11% of its eligible loans through the program. Wachovia's slow start is a serious problem for borrowers like Bell, who has an option ARM mortgage (called Pick-A-Pay by the lender) on his San Diego County home. Bell expects the interest on his mortgage payments to increase dramatically in early 2009 and knows he won't be able to pay, so he has called Wachovia every week since June for help -- and been rebuffed every time. A spokesman said Wachovia will begin accepting HAMP applications in the next couple of weeks.

The article says option ARM mortgages like Bell's are particularly difficult to adjust because they can actually add principal to the loan balance. They were also typically sold to borrowers in areas like Southern California that once had inflated real estate values and have since crashed hard, meaning that the homeowners are often far underwater even without the negative amortization. For that reason, Wachovia said it prefers its own in-house loan modification program, which relies on interest-only loans rather than lowering interest rates, over HAMP. A Wachovia representative told Bell that program started in September; a spokesman told the newspaper that it started in January.

As Corona loan modification attorneys, we're not sure what we like the least about this story: Wachovia's lack of clear communication or its reluctance to participate in HAMP. As noted above, the in-house program Wachovia prefers uses interest-only loans to cover the loan payments on an option ARM loan for 10 to 15 years; the homeowner would then start paying down principal. This helps protect Wachovia's profits and may help the homeowner ride out a bad real estate market, but it puts the borrower even deeper into debt and completely fails to address the underlying problems of the option ARM loan. By contrast, HAMP relies on lower interest rates; borrowers like Bell may also want to try restructuring their loans to avoid the uncertainty and high interest of an option ARM. From here, it looks like Wachovia is willing to give lip service to helping homeowners, but when it believes profits are threatened, it won't step up.

Howard Law LLP has an active loan modification practice representing people who have tried without much success to get loan modifications on their own. We believe our status as Vista loan modification attorneys gets results, even when struggling homeowners have been met with indifference, because lenders understand that a lawsuit may soon follow when attorneys get involved. In fact, we start each case by reviewing the loan's history for any evidence of predatory lending -- which is particularly likely for owners of expensive subprime or option ARM loans, like Bell. If appropriate, we are not afraid to pursue a legal claim to keep our clients out of foreclosure and get them a fair chance at a loan workout that keeps them in their homes for good.

If your home is threatened and your lender refuses to consider a loan modification, you still have options. Howard Law can explain those options at a free, confidential consultation on your case. To set one up, please contact us online or call us toll-free at 1-800-872-5925.