Our experience with clients’ attempts to modify their mortgage loans has been disappointing. Neither we nor our colleagues have been able to make sense of the actions of mortgage servicers. Our experience has been confirmed by a recent spot check study of the Consumer Financial Protection Bureau, reported by Bloomberg on October 29, 2014. http://www.bloomberg.com/news/print/2014-10-29/consumer-bureau-finds-homeowners-harmed-by-loan-companies.html.
Back in January 2014, the CFPB implemented regulations covering how mortgage servicers handled these types of transactions. Recently it did a spot check of compliance. The findings?
1. Substantial delays in modifying loans resulting in negative consequences including higher mortgage payments and unjustified damage to borrower credit.
2. Failures to convert successful trial mortgage modifications into permanent ones. The delays meant unpaid interest charged at the old rate was added back into the loan raising the total loan cost.
3. One servicer reportedly sent permanent loan modification documents to borrowers, then after these were signed and returned, changed the terms in ways that were “materially different”
The CPFB and state regulators have already gone after and made settlements for substantial penalties against servicers including Flagstar Bank and Ocwen. Others including Green Tree Servicing are under investigation.
The mortgage servicing industry handle over $9 trillion in mortgage payments. What the CFBP has found is no surprise to us.
For borrowers facing these types of difficulties, the results can be catastrophic. Aggressive regulation to ensure fairness is long overdue.
Anyone facing the possible loss of a home should seek qualified legal advice without delay, and recognize that loan modification is not always successful or even realistic.