HAMP: California Homeowner Can't Escape Unwanted Mortgage Modification
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WASHINGTON -- Getting a mortgage modification from the Obama administration's anti-foreclosure program can be a tricky process. One California homeowner has found it even more difficult to escape a modification he didn't want.
Stacy Wilson of Plumas Lake, Calif., said he sought reduced monthly mortgage payments from Bank of America via the government's Home Affordable Modification Program in April 2010 after his salary was reduced. People who are current on their mortgage but could face "imminent default" because of reduced income are eligible for the program, which can lower monthly payments by hundreds of dollars.
Wilson, who works as a researcher for the California Postsecondary Education Commission, said Bank of America repeatedly lost his paperwork before finally offering a trial modification in January. After reading news stories about HAMP's potential pitfalls for homeowners, Wilson reconsidered.
"After carefully reading all documents sent to me, I realize that my good credit might be adversely affected if I participate in the program," Wilson wrote in a letter he faxed and emailed to the bank. "Since November 2007, when I purchased my home, I have never missed a mortgage payment, nor have I ever been late on a payment. Maintaining good credit and faithfully honoring all financial obligations is extremely important to me, as taught to me by my grandmother, Blanch Jones."
Another risk homeowners bear when applying for HAMP modifications is that if they make reduced payments during the trial phase and are then rejected for the permanent mod, they owe the bank a big chunk of money: the difference between the sum of their reduced payments and what they would have paid normally, plus late fees. And the foreclosure process will have already started. (Though fewer people should find themselves in this situation since HAMP's application requirements were tightened in 2010.)
According to an email Wilson shared with HuffPost, a Bank of America loan modification specialist responded, "I completely understand your position and I wish you the very best. If there is anything you need in the future, please advise."
Wilson continued making his full monthly payments, according to a copy of his bank statement. Yet correspondence he soon received from Bank of America suggested his decision not to do a HAMP mod had been ignored. "You are currently participating in a Home Affordable Modification Trial Period Plan," said a letter that invited him to make payments nearly $200 lower than normal.
Since January, "each month I would receive a statement saying that my loan was in modification even though it wasn't," Wilson wrote in a Tuesday email. "Each month I would call BOA asking that the situation be corrected. Each time I was told that the problem would be corrected. Now, this month I received my loan statement saying that there was a past due amount of $2,216.72, with a late charge of $78.50."
Wilson said he received a phone call on Tuesday evening from the office of a bank executive who said the situation would be corrected immediately. The executive said Wilson would receive a new statement showing no past due amount within a week.
"If this happened to me," Wilson asked, "how many other people are in the same situation?"
A lot of people have had trouble with HAMP. More than 843,000 homeowners have had their trial or permanent modifications canceled since the program launched in 2009, according to Treasury Department data, while fewer than 610,000 homeowners remain in permanent mods. The failure of the program to reach its stated goal of modifying mortgages for 3 to 4 million homeowners owes largely to its failure to punish banks for violating the program's guidelines, according to homeowner advocates and federal auditors.
The Office of the Comptroller of the Currency and other federal bank regulators recently issued an order requiring banks to treat their HAMP customers better, including by giving them a single point-of-contact throughout the application process, though homeowner advocates are skeptical banks will face consequences for disobedience.
Bank of America did not comment on Wilson's situation in a statement to HuffPost (banks generally don't comment on individual customers).
"In response to customer feedback and prior to the OCC review, we began assigning customer relationship managers to improve communication and provide greater clarity throughout the entire modification process, reducing handoffs and making things more seamless and effective for customers," the bank said. "Today, we are well along toward enacting a single point of contact process, which we expect to have through the consent order review process and implemented later this year."
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First Posted: 06/15/11 05:24 PM ET Updated: 08/15/11 06:12 AM ET