How to report lender not honoring loan modification
Mortgage service providers process loan modification applications for homeowners. Unfortunately, service providers often make serious mistakes when processing correction requests. These mistakes can cause a lot of problems for homeowners, such as losing a loan solution or foreclosure.
Here are some common problems that service providers face during the loan repair process.
Many homeowners have experienced long delays waiting for service providers to decide whether to approve a loan modification. In some cases, the service provider does not inform the homeowner that the documents required to make a loan modification decision are missing. In other cases, the administrator cannot review the request quickly.
The Federal Mortgage Services Act, effective January 10, 2014, aims to reduce these delays. The law requires service providers to:
check the application
determine whether the application is complete or incomplete;
Notify the borrower within 5 days stating that the application is complete or incomplete. (If incomplete, the administrator must explain the information needed to complete the application.)
When a service provider receives a completed application 37 days before the foreclosure sale, the service provider must review the application and determine if the borrower is eligible to modify the loan within 30 days. However, administrators typically don’t have to consider multiple loss mitigation applications. However, if you upgrade your loan after claiming the loss allowance, you can apply again.
Tell the owners that they must be in arrears
During the foreclosure crisis and the Great Recession, caregivers told homeowners they couldn’t get a chance if they didn’t payback. Sometimes, though not very often, administrators still make this statement. This comment is almost always incorrect.
For most modification programs, you may be late in paying or simply in danger of being left behind (so-called “imminent default”) on your mortgage payments.
Request an owner to resubmit the information
In some cases, managers ask homeowners to resubmit and resubmit information when they request a loan modification. A common scenario includes income verification documents, such as payslips and bank statements, which can quickly become out of date in the manager’s eyes. If the administrator does not quickly review the documents you submitted, the documentation expires. The manager will then ask you to resubmit your articles.
Additionally, servicers sometimes ask borrowers to resubmit documentation after documents are lost. If the documentation is missing, the duplicate information requested by the manager must be resubmitted. But make sure you keep a record of when you sent it, who you sent it to, and send it in a way that can track it.
Use Incorrect Revenue Information in Net Present Value Processing (VPN) or Other Calculation Error
Sometimes an administrator makes a mistake in a calculation when evaluating a borrower for a loan modification, which leads to an undue rejection.
What is a VPN calculation?
When an administrator evaluates a borrower for a loan modification, he or she observes the borrower’s financial information, current loan terms, and the fair market value of the property. Then he sometimes makes a comparison between:
The expected cash flow the investor will receive if the loan changes, e
The investor’s cash flow if the loan is approved.
If the investor is financially better off after a foreclosure than the change (called a negative “net present value” or “NPV”), the manager does not need to change the loan. However, managers sometimes make mistakes when calculating NPV.
Federal law requires that if a test or permanent loan modification is denied because of the NPV calculation, the service provider must include in the denial notice the item used to calculate the NPV.
Other calculations related to loan modifications
Other miscalculations can lead to correction errors. For example, in 2018, Wells Fargo admitted that a computer glitch prevented it from providing solutions to nearly 900 mortgage borrowers. The bank eventually seized around 500 owners.
Unable to convert test solution to permanent solution
Many loan modifications start with a three-month trial plan. As long as three payments are made on time during this period, the changes are permanent and are assumed to meet the eligibility criteria.
When an administrator promises to amend an eligible loan, homeowners who fulfill their part of the agreement expect the administrator to keep their word. But sometimes the owners who made the trial payments can’t convince the administrator that the change is permanent.
Not reviewing an application or violating a modification agreement after a transfer of service
Service transfers often occur in the mortgage industry. In some cases, the new administrator does not review an existing loss mitigation request or does not comply with a modification agreement with the previous administrator.
Under federal law, if a total loss mitigation request is pending at the time of service transfer but has not been evaluated, the new administrator must review the request within 30 days of the transfer date. Additionally, a transfer of service should not affect the borrower’s ability to accept or decline a loss mitigation option offered by the former manager. If a new servicer appears and the deadline for accepting or rejecting a loss mitigation option offered by the previous servicer has not expired on the date of the transfer, the new servicer must allow the borrower to accept or decline the offer during the period of transmission. unpaid balance during the applicable time.
If your administrator commits any of the violations mentioned in this article or is mishandling the loan modification, you should consult with a foreclosure attorney, especially if you are facing an impending foreclosure. A lawyer can advise you on what to do in your particular situation. If you have questions about loss mitigation options, it’s also a good idea to talk to a HUD-approved real estate advisor.
For information on foreclosure defense call us at (877) 399 2995. We offer litigation document review support, mortgage audit reports, securitization audit reports, affidavit of expert witness notarized, and more.