Mortgage Servicers Facing Lawsuit Over Loan Modifiction Problems

by San Antonio Attorney

Maria Campusano thought that her financial troubles were over when her monthly payments for her Victorian home mortgage in Massachusetts mill town had been reduced.

Later on, she found out that her problems were only starting. She had been very worried about losing her home after receiving overdue notices and threat letters saying that she could lose her home. These came weeks after she made her first payment under the adjusted rate.

A class action lawsuit against Bank of America NA and BAC Home Loans Servicing LP subsidiary was filed in the federal court of Los Angeles by Campusano and another plaintiff.

There is an increasing number of legal complaints that accuse banks of neglecting what ought to be binding agreements to lower the home loan repayments each month of distressed borrowers.

The lawsuits include long term adjustments through the Home Affordable Modification Program (HAMP) administered by United States Treasury. The program offers incentives to mortgage servicers who extend adjustments, and also proprietary loan modifications, which banking institutions give separately of the guidelines set by the government.

The lawsuits are a completely new influx of claims against banking institutions that have already endured complaints for a long time because of their unwillingness to modify loans and also for the foreclosures after giving borrowers trial offer on modifications.

There are banks that have dealt with suits claiming that the property foreclosures disregarded their agreement with the government which was made when they received $700 billion funds from the Wall Street aid. Also, the officials of U.S. Treasury said recently that it was suspending incentives from JPMorgan Chase & Co, Bank of America Corp, and Wells Fargo & Co because of the said banks inaccurately determined that numerous borrowers were not qualified for HAMP modifications. The banks have denied the allegation.

However, lately, loan servicers and government officials were giving reports that show a growing number of loan modifications being given. In April’s HAMP statistics, about 70 % of trial modifications that started on June 1, 2010 were already turned permanent in accordance with the guidelines of the program. This was up from 42 % for trial modifications initiated before that date.

At the same time, a report by Hope Now group, which is a group of large financial institutions such as banks and loan servicers, showed its members already made 1.8 million loan modifications in the year 2010 and increased from 1.2 million in the year 2009.

Although distressed borrowers are more and more able to meddle with the modification agreements which the banks unwillingly provide, the debtors discover that their troubles continue after the modified loan contracts have been signed.

The Connecticut Fair Housing Center checked its members’ 655 loan modifications extended to their borrowers in 10 states, over the past few fear years. The non-profit organization discovered that almost 25 % of them have issues with incorrect loan balance documents, erroneous notifications on default, and other problems.

Campusano’s case points out information from an unnamed former call center employee who claimed that employees were given incentives for collecting payments which were more than what was payable based on the modification agreements. According to Attorney Shennan Kavanagh the employee would give a statement or testify if required in the trial.

But real estate finance professor at the University of Southern California Tracey Seslen explained that the banks could be simply overwhelmed by the situation. They do not have the manpower necessary to prevent such problems.

Regardless if the issues were caused by paperwork errors, inadequate control, or something that is dubious, the effect on householders is serious.

After Julie Lewis paid more than 6 months of her modified payments in October 2010, CitiMortgage informed her that she was denied of the modification. She is 53 years old, divorced, and a mother of four. Her contract with CitiMortgage for her Staten Island house in New York was modified after she got divorced and injured in a car accident that prevented her from going to work.

Agents of CitiMortgage had been coming to her street to take photos of her house or put leaflets on her door to notify her to call the bank in order to talk about the supposedly overdue payments. The banks are bullying their borrowers, according to Lewis.

Still in Staten Island, New York, a couple whose names are Tamar Bibishvili and Merab Abdaladze have difficulties making Chase acknowledge a HAMP loan modification that was made permanent.

After taking their first payment in accordance with the loan modification deal, Chase told them that the modification had been denied and discontinued to encash their check payments, based on a motion filed in the state court of New York. After that, Chase attorneys reassured the attorney of the couple that the modification was legitimate, but their checks were still sent back to them.

Emily and Nathaniel Perrone who lives in a suburb of Issaquah City received a notice of missed payment shortly after BAC made their loan modification permanent.

Customer service staffs of BAC had consistently reassured Nathaniel Perrone that the bank made a mistake on the charge. The missed payment plus late charges are still reflected on their account even though eight months have already passed.

Shirley Norton, the spokeswoman of Bank of America, did not give a comment on the Campusano and Perrones cases. The two are co-defendants in the class-action lawsuit against the bank.

Campusano was seeking a modification for a loan that she refinanced earlier in order fix her home in Lawrence, Massachusetts. She wanted to cut down her household expenditures because she was supposed to start paying a student loan and lately she had taken in the two children of her sister who had died. Campusano is 44 years old and a single mother.

She was granted with a mortgage modification in April 2010 and had made the required payments. After 3 months, she got a bill statement that incorrectly identifies her loan as interest-only. In an Interest-only loan, the borrower’s initial payments are considerably smaller than the usual because the amount being paid is for the interest only while the principal is paid five or ten years later.

When Campusano contacted the bank in November to clarify the foreclosure threats she had been receiving, she was told that her payments were actually in advance. A month later, she got four different notices of foreclosure, and each of them had varying amount as her monthly repayment.

Campusano said that she had been paying properly and the bank is treating her unfairly. She is wondering why she is having such problems now when there was a signed agreement on the loan modification.

Big Banks such as Bank of America have taken advantage of people or made errors that have adversely affected home owners.  If you need help San Antonio Attorney suggest contacting a San Antonio Real Estate Attorney.


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