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Does this Loan Modification Story Sound Familiar to You?

The following story about a Lakeland, FL woman appeared in the NY Times on January 2, 2010.  You can read the full article here:

 

http://www.nytimes.com/2010/01/02/business/economy/02modify.html?hp=&pagewanted=all

 

This story illustrates the reason I completely distrust the major mortgage loan servicers/banks participating in the Making Homes Affordable Program.  Notice the cavalier way the representative from Chase categorizes the "error" and "systems glitch" her company made in foreclosing on Mrs. Smith's home.  This "error", in my opinion, is not an error at all, but instead a well thought out business model allowing the servicers to collect and foreclose on loans at the same time.  I have seen far too many stories like Ms. Smith's to believe this is an isolated incident.

Perhaps Ms. Smith could have filed bankruptcy and eliminated her liability for the loan entirely. She could have continued to live in the house while the servicer supposedly attempted to "modify" her loan, and she could have saved up money to go to grad school as she had planned.  She probably would have had enough money saved up to pay for a move into a more affordable rental place while she got back on her feet financially.  Here's the excerpt:

 

In Lakeland, Fla., Jaimie S. Smith, 29, called her mortgage company, then Washington Mutual, in October 2008, when she realized she would get a smaller bonus from her employer, a furniture company, threatening her ability to continue the $1,250 monthly mortgage payments on her three-bedroom house.

In April, Chase, which had taken over Washington Mutual, lowered her payment to $1,033.62 in a trial that was supposed to last three months.

Ms. Smith made all three payments on time and submitted required documents, Chase confirms. She called the bank almost weekly to inquire about a permanent loan modification. Each time, she says, Chase told her to continue making trial payments and await word on a permanent modification.

Then, in October, a startling legal notice arrived in the mail: Chase had foreclosed on her house and sold it at auction for $100. (The purchaser? Chase.)

“I cried,” she said. “I was hysterical. I bawled my eyes out.”

Later that week came another letter from Chase: “Congratulations on qualifying for a Making Home Affordable loan modification!”

When Ms. Smith frantically called the bank to try to overturn the sale, she was told that the house was no longer hers. Chase would not tell her how long she could remain there, she says. She feared the sheriff would show up at her door with eviction papers, or that she would return home to find her belongings piled on the curb. So Ms. Smith anxiously set about looking for a new place to live.

She had been planning to continue an online graduate school program in supply chain management, and she had about $4,000 in borrowed funds to pay tuition. She scrapped her studies and used the money to pay the security deposit and first month’s rent on an apartment.

Later, she hired a lawyer, who is seeking compensation from Chase. A judge later vacated the sale. Chase is still offering to make her loan modification permanent, but Ms. Smith has already moved out and is conflicted about what to do.

“I could have just walked away,” said Ms. Smith. “If they had said, ‘We can’t work with you,’ I’d have said: ‘What are my options? Short sale?’ None of this would have happened. God knows, I never would have wanted to go through this. I’d still be in grad school. I would not have paid all that money to them. I could have saved that money.”

A Chase spokeswoman, Christine Holevas, confirmed that the bank mistakenly foreclosed on Ms. Smith’s house and sold it at the same time it was extending the loan modification offer.

“There was a systems glitch,” Ms. Holevas said. “We are sorry that an error happened. We’re trying very hard to do what we can to keep folks in their homes. We are dealing with many, many individuals.”

 


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