Today @citibank launched homeownersupport.com 2 help connect struggling homeowners w/ those who have been through it. Love being part of it
— Frank Eliason (@FrankEliason) December 17, 2011
When a bank tries to “reach out” to anyone, it is usually trying to accomplish one of two things: (1) selling more loans, or (2) trying to make itself look good. With its new HomeownerSupport.com, Citibank is apparently trying to do both. It’s kind of like a burglar putting up a Facebook page for his victims to “connect” with one another, talk about what wasn’t stolen, and share their upcoming vacation plans.
Customer service Twitter star Frank Eliason has his work cut out for him on this one.
— Chen Mingi (@chen_mingi) December 17, 2011
Edit: I should point out that in yesterday’s post, I noted that federal district court Judge Jed Rakoff called Citigroup a “frequent offender” of securities laws.
If you want a mortgage modification, most lenders will tell you to stop making mortgage payments before they will consider you for modification. Of course, if you stop making payments and you don’t get a mortgage modification, you will end up in foreclosure. Letting your loan go into default is a risky proposition because the downside is losing your home.
Once you stop making payments—even if you make reduced payments—you are in default on your loan, which means you will go through months of submitting paperwork, navigating phone trees and bank representatives, and re-submitting paperwork the bank lost. Then, one of two things will happen:
The Indiana Court of Appeals have suggested that banks that do not comply with Fair Housing Act servicing guidelines may not be able to foreclose a property until they do. HAMP—the Home Affordable Modification Program—is not much different in character than the FHA servicing guidelines, so the Indiana court’s decision might provide a way to stop foreclosures, at least until banks and mortgage services give the homeowner an honest shot at a HAMP mortgage modification.
It turns out that using HAMP as a shield has been tried with some success, so it’s probably worth a try for frustrated homeowners facing foreclosure after a failed attempt at mortgage modification.
Last week I wrote about the various ways that consumers can afford a foreclosure defense attorney. New York has passed a law allowing consumers to recoup attorney fees and at least one attorney in Florida is allowing clients, under certain conditions, to take a mortgage with his firm.
That practice might be short lived—he is now under investigation by the Florida bar.
Even before a number of big banks stopped foreclosure proceedings because of issues with robo-signers, consumers with money were fighting foreclosures across the nation. New York recently passed a law (effective next year) that allows consumers to recoup their attorney fees if they fight a foreclosure and win.
Not every state has a similar law, however. As a result, some consumers are agreeing to a new mortgages with their foreclosure attorneys.
Bank of America (BOA) has announced they will provide some relief to homeowners with underwater mortgages. BOA said it will forgive up to 30% of the total mortgage for homeowners who are at least 2 months behind in payments and owe at least 20% more than their home is worth.
The government’s “Financial Stability Plan” is still viable, but the Treasury Department admits that only a fraction of people eligible are receiving new mortgages.
The biggest offenders? Wells Fargo only modified 6% of their loans, Bank of America only modified 4%.
The “successful” lenders—J.P. Morgan and GMAC—modified 20% of eligible loans.
The government and the banks say consumers are getting mortgage modifications, while the numbers and consumer advocate say otherwise. Minnesota business lawyer Nathan Brandenburg took a stab at unraveling the confusion which may be part of the reason why consumers are not getting the modifications they want.
He points out two important features of the loan modification options: (1) they are need-based; and (2) they will not reduce the loan principal.
Need-based means that consumers can obtain a mortgage loan modification only if they can prove they cannot afford their current payments. I am guessing the banks take an expansive view of the term “afford,” which counts out a lot of people.
More importantly, only terms of the loan like interest rates, fixed v. adjustable rate, and length of the loan will be modified. For consumers stuck with homes valued at far less than the loan, this is bad news. If the bank cannot make the loan payments affordable without reducing the principal, they may simply proceed with foreclosure, even though everyone would probably come out ahead if the bank simply reduced the principal on the loan.
But hey, I don’t think anyone believes that banks are rational actors in the economy, anymore.
Mortgage Modification Confusion | Skjold Barthel, P.A.