Tales of a Paralegal: Servicer Abuse

Author: Katie-Lee Harrison, Paralegal
 
A recent article in the New York Times  points to the ongoing problem of mortgage servicer abuse. Loan Complaints by Homeowners Rise Once More (What is the difference between a mortgage servicer and mortgage investor? find out here.)

We have experienced the problems with servicing transfers first hand:

1. We submit a loan modification application to Bank of America.
2. A week later the homeowner recieves a notice that Bank of America will be transferring  servicing rights to Select Portfolio Servicing (or any other number of servicers) next month.
3. So the loan modification sits in limbo until servicing rights transfer and SPS has processed the loan into their system.
4. We call SPS who tells us that although all other records have transferred over, we will have to submit a new loan modification application because they don't receive that information from Bank of America (plus 60+ days have gone by since we originally sent everything and since no one looked at it or reviewed the items they have all become outdated).
5. We resend the application to SPS with updated financial documents and then SPS tells us they have their own version of the required forms and can't use the forms Bank of America had accepted.
6. Finally, months after the original application was submitted and now a second application has been submitted and updated with the new forms, SPS begins to review the loan modification request.

It is a hassle and a pain and there is very little a homeowner can do to avoid such problems. However, there are things we have learned to make the transition as smooth as possible:

• Always keep a copy of the loan modification application and other documents submitted to avoid having to recreate the same information twice.
• When you receive notice that servicing rights will be transferred, look up the new servicer's loan modification requirements onlnine to find out if they have special instructions or required forms (if this information is not available online, you can call the new servicer before your loan has transferred to ask these general questions).
• The new servicer will send a letter with a new loan number as soon as servicing has transferred, prepare a complete loan modification application and write the new loan number at the top of every page.
• ALWAYS include updated & recent financial information when submitting the loan modification application to the new servicer.
• For most servicers, a loan modification application will be uploaded to their system 48-72 hours after it is received - call the new servicer to verify that all of the required documents have been received and sent to the correct department.

We've found that these tips have made the transfer much smoother and more timely. What has been your experience?

SCAM ALERT – Fake Loan Modifications

Ms. Smith, a school teacher having difficulty paying her mortgage, had been seeking a loan modification for over 2 years.  Bank of America would not budge.  Instead, in early 2012 it filed for foreclosure.

Surprisingly, on October 2, 2013, Ms. Smith received an approval letter stating:

‘The new loan terms of your pending modification will be as follows, 30 year fixed with a new maximum monthly payment of $732.68… You will be required to pay 3 trial payments for December, January and February, 2014.  Your lender is requesting a Reinstatement Fee on your loan of $2,025.77, due no later than 10/04/13.  Please see below for mailing and check instructions.  The payment must be made by certified funds only.  Please contact your case manager with any additional questions.’  

Ms. Smith was ecstatic.  She immediately called the number in the letter and spoke to her case manager.  He told her to hurry because if the check was late she might lose the modification.  She sent the Cashier’s Check for $2,025.77 the next day by Federal Express.  It was a lot of money, but Ms. Smith could not have been happier to send it!  After all she had been through, the struggle was finally over.  She would not lose her home!

Three months later, Ms. Smith received a letter about her foreclosure case.  Her home had been sold, without her knowledge, at a foreclosure auction on October 14, 2013, just 10 days after she had sent $2,025.77 to Bank of America.  She must leave her home, or be evicted, in a month.  

How could this be?  There must be a mistake.  Her loan had been modified.  Or had it?

No, her loan had not been modified.  The letter was a fake; part of a simple, but effective scam.  Ms. Smith, a distressed homeowner anxious for a loan modification, was a perfect target for this scam.  Most of the millions in foreclosure would fit this profile.  Now Ms. Smith would lose her home, after already losing thousands of dollars to thieves claiming to be representatives of Bank of America.

Any good attorney would probably have recognized the letter as a fake, or at least have been very suspicious.  That’s one of the benefits of having professional help with your loan modification application.  However, Ms. Smith lived alone, and did not use an attorney for the foreclosure defense or loan modification application.  She had no one to consult, so she called the bank… or so she thought.   

One simple way to avoid this happening to you:  If you get an offer for a loan modification, contact the bank at a different number than that shown on the offer letter.  Use the telephone number from an old mortgage statement, or Google “Bank of America Mortgage Assistance” and call that number.  Your bank will provide the details of any current loan modification offer, if there is one.  If you learn there is no “real” loan modification offer, call your Attorney General’s office immediately.   

Finally, it is said that if something seems too good to be true, it probably is.  That’s not the case with loan modifications, many of which have been spectacular over the last few years.  So, don’t ignore that spectacular loan modification offer just because it looks too good to be true, but do call your bank (at a number not on the offer letter) and verify the terms before sending any payments.

Author Rick Rogers, JD/MBA is the Managing Attorney for the Rogers Law Group, a Law Firm dedicated to Home Preservation via Foreclosure Defense, Loan Modification, Mediation, and Bankruptcy.  He has instructed hundreds of attorneys across the nation on HAMP and Loan Modification Best Practices.  He may be contacted at rrogers@therogerslawgroup.com or through www.therogerslawgroup.com .