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On November 5, 2009 the gloves came off in the state of Ohio.  At stake is how much control can a state have over the way a mortgage company modifies loans for people facing foreclosure in that state. 

 Up until now mortgage companies have run their loan modification programs without any monitoring from state and federal offices.  In some instances the modifications they have offered have been on their terms.  They have given very little consideration to the people to whom these have been offered.  They have also paid little attention to the state or federal governments.

 On one side there is Ohio’s Attorney General.  He filed a suit against American Home Mortgage Servicing, Inc. (AHMSI).  The suit alleges that the company violated Ohio’s consumer protection laws.  His suit deals with how AHMSI is handling the cases of people whose loans they are servicing and who have requested loan modifications.  He asserts that the company violated the law by

•  Ignoring the requests of people facing foreclosure for loan modifications,
•  Having incompetent and inadequate customer service, 
• Failing to modify loans in a timely manner, and  
• Offering unfair and deceptive terms on loans that it did modify.

 The Attorney General’s office indicated that they had received complaints from 119 residents of Ohio facing foreclosure about the way AHMSI treated them when they asked for help to save their homes.

 In this suit the Attorney General seeks a permanent injunction against AHMSI continuing these practices.  He also asks penalties to be assessed.  He also requests that the court order the company to put in place processes designed to provide efficient, competent and adequate customer service for all of the Ohio residents whose loans its services.

 On the other side is American Home Mortgage Servicing Inc.  This is not a mortgage company.  It is a servicer.  It originally was the servicing arm of American Home Mortgage.  When that company went bankrupt in 2007, American Home Mortgage Servicing Inc. was sold to Wilber Ross & Co LLC.  The company services the loans kept by American Home Mortgage.  They also have become the second largest servicer of subprime loans in the United States.  They took over the servicing of the loans of Option One when that company went bankrupt.  They purchased the servicing rights on some subprime loans from Citi Residential.  In 2009 they started servicing some loans of the bankrupt Taylor, Bean and Whitaker that they purchased from Wells Fargo.

 At the same time the lawsuit was filed by the Attorney General in Ohio, AHMSI filed a counter suit against the Attorney General.  They asked the court to declare that the way they handle loan modifications and the service they offer to people seeking loan modifications are in line with the law in Ohio.  When they filed their suit, the company sent out a press release.  Here are some of their comments from that release:

•  They have a large staff in place and have high customer service standards.
•  Their customer service representatives work closely with people who contact them to resolve questions, concerns and complaints they have. 
• They have worked closely with people from Ohio who have contacted them about loan modifications. 
• Since joining the Making Home Affordable Loan Modification Program in July of 2009, they have sent letters to every Ohio resident behind on their loan payments and eligible for a potential modification under this program inviting them to apply for a modification. 
• Prior to joining the Making Home Affordable Modification Program they had developed their own loan modification program to assist those who were facing foreclosure. 
• Representatives of their company have participated in Outreach events held in Ohio at which they have met face to face with people whose loans they serviced and were facing foreclosure. 
• Since October of 2008 the company modified the loans of 2,200 people in Ohio under their own program.  There were an additional 173 people who currently have trial loan modifications under the Making Home Affordable Modification Program.

 In the press release they also commented on their nationwide effort to help people facing foreclosure save their homes.  They said that from October 1, 2008 to September 30, 2009 they have offered more than 67,000 loan modifications to people whose loans they service.  These were outside of the Making Home Affordable Modification Program.  This was greater than 15% of all of the loans they service.  On 79% of these, the monthly principal and interest payments were reduced by an average of 30.5%.  Since they joined the Making Home Affordable Modification Program on July 22, 2009 they have initiated more than 6,800 loan modifications under that program.

 Who is correct?  Is the Attorney General correct or has AHMSI acted in the best interests of the people in Ohio whose loans they service?  The courts will decide this.  However, there is other information available which shows how AHMSI is working with people who are facing foreclosure and want to save their homes.

The Obama Administration publishes a monthly Servicer report showing how each company is performing in the Making Home Affordable Modification Program.  The report through November of 2009 indicates that AHMSI’s loan modification activity has been very poor.  Trial loan modifications have commenced on only 6.3% of all of the loans AHMSI services which the Administration estimates are eligible for modification.  Thus far permanent modifications have only been offered on 201 loans.  That is 2.6% of their loans with trial modifications. 

 The report indicates that trial loan modifications have been offered on 23% of all of the loans for all mortgage companies in the program.  Permanent modifications have been offered on 31,382 loans.  That is 4.1% of all loans with trial modifications.  So AHMSI is right near the bottom.

 Here are the figures for AHMSI from the report through November of 2009:

•  120,787 – Estimated loans eligible for modifications 
•  12,621 – Trial Loan Modifications Offered 
•    7,642 – Active Trial Loan Modifications 
•       201 – Permanent Modifications

 As these numbers indicate, AHMSI has just barely scratched the surface on the loans they are servicing where people are facing foreclosure.  They report that they have modified more than 67,000 loans outside this program.  There is no way to know how accurate this figure is since an independent company has not verified it.  There also is no way to know how many loans that the company services which are outside the Making Home Affordable Modification Program are eligible for loan modifications.

 A search on Google indicates that there have been numerous complaints from people nationwide whose loans AHMIS services.  Many deal with the poor service they have received from the company when they asked for a loan modification.  In August of 2009 there was one post which suggested that the people who had problems with AHMSI ban together and file a class action law suit against the company.

 Much is at stake in these suits for the Ohio Attorney General, AHMSI and the people whose loans they service who are facing foreclosure.

The Attorney General has to protect the people of Ohio.  He has to make sure that those who are facing foreclosure and who desire to save their homes are not mistreated by the mortgage companies handling their loans.  If his suit is successful, then he will be able to go after other mortgage companies against whom complaints have been filed and get them to correct their ways.

 IF AHMSI is successful, they will avoid penalties.  They also will be able to process requests for loan modifications without governmental agencies looking over their shoulders and demanding that they handle these any differently than they are currently.  If they lose the suit not only will they have to pay a penalty assessed by the state of Ohio for their actions, the company will also open itself up to law suits filed in other states.  There is also the potential of a class action suit being filed against them.

 If the Attorney General wins the suit, people facing foreclosure whose loans are serviced by AHMSI will get better service from the company when they request a loan modification.  Their requests will be processed more timely.  Any modifications will be fairer for them.  If AHMSI wins the suit, then they will continue to be treated as they have been with little change being made by AHMSI.

 It is unclear who is right.  Are they allegations made against AHMSI by the Attorney General in Ohio correct?  Are the assertions made by AHMSI about the job they are doing on loan modifications correct?  If you are facing foreclosure and if your loan is being serviced by AHMSI, you should hire a lawyer skilled in foreclosure law to represent you.  You have too much to lose if you don’t.

 I would also recommend that regardless of who your mortgage company is, don’t try to get a loan modification on your own.  Hire a lawyer or an expert in loan modifications to represent you.  They can get a far better outcome for you. 

 You may also want to check out my EBook.  It will help you understand the foreclosure process and the steps you can take to save your home.   You can get more information on it by clicking Stop Foreclosure.

 Much Success,

Mark Elkins

Ever since the start of the Making Home Affordable Modification the mortgage companies have been slow in processing applications for loan modifications for people facing foreclosure.  Numerous times in past posts here on my blog I have commented on how poorly the companies have treated these people.

Up until now the mortgage companies have controlled the loan modification process and any other steps people undertook to try to save their homes from foreclosure.  The companies did what they wanted without regard to the people they were supposedly helping, nonprofit organizations, and city, county, state and federal governments.  In normal times they got away with this. 

Back in the Good Old Days

The number of foreclosures at any given time was low.  It was beneath everyone’s radar.  No one really paid attention to what was happening.  Back in those days, there were no real attempts to help people avoid foreclosure. 

If people were behind on their house payments, the mortgage companies just took the amount they were short, added interest and penalties to it and tacked it onto the balance owed.  They took the total and typically divided it by a certain number of months and added that amount to the monthly payment.  The person facing foreclosure was advised what the mortgage company had done.  They were also told that their new payment monthly would be that inflated amount.  When they paid the total off, their monthly payment would drop back to what it had been.

The people were responsible for making the larger payment.  The mortgage companies didn’t care where or how they came up with the money.  They just expected the people to get it.  If they couldn’t, the mortgage companies didn’t care.  They just went forward and foreclosed on the homes.

Those Really Weren’t Good Old Days, Were They?

I am sure you would concur with me that if the American public knew what was happening, they would have been outraged.  Yet because of our ignorance mortgage companies got away with it.

As the foreclosure crisis has grown and reached epidemic proportions, far more attention has been placed on the mortgage companies and how they handle foreclosures.  The initial programs introduced by the Federal Government requested the mortgage companies to do certain things voluntarily.  They never did and the programs failed.

The Making Home Affordable Modification Program

In March of this year, a new program was rolled out by the new administration.  The Making Home Affordable Modification Program was introduced.  On paper it is a great program.  It called for loan modifications where the monthly payment of a person facing foreclosure would be reduced to 30% of their gross income.  This would enable many more people to save their homes than were ever able to in the past.

There was only one major problem.  There were no penalties in it for mortgage companies if they did not follow through on modifying loans as specified in the program.  There were certain cash incentives built in; however, these were not large enough to make it advantageous for the mortgage companies to modify loans.

So the mortgage companies continued to do as they had been doing, not really modifying loans or attempting to do so and blaming it on the people who were facing foreclosure.  They said that the people who had financial challenges were not submitting the necessary information to them.  They were uncooperative.  

There Was One Big Difference

The problem was too big.  There were too many foreclosures.  There was too much attention focused on the mortgage companies.  Too many people were complaining about how uncooperative these companies were.  Reporters investigated and found that most complaints were legitimate.  The U S Treasury and the Department of Housing and Urban Development which oversaw the Making Home Affordable Modification Program had to do something.

The Monthly Servicer Reports

At the end of July executives from the mortgage companies were called to a meeting in Washington with high level officials from the U S Treasury and The Department of Housing and Urban Development.  At this meeting they were told that their performance had to improve.  They also were told that beginning in August the U S Treasury would start to release monthly reports on.  These reports would show what each mortgage company was doing with their loans in the Making Home Affordable Modification Program.

Each month since then reports have been released.  These have shown that the mortgage companies have really been doing a horrible job with loan modifications.  The mortgage companies have put their own spin on their poor performance.  Some have said that they are proceeding cautiously with modifications because they want most of the people to whom they give modifications to be able to save their homes.  Others continue to blame the people who have requested modifications for not submitting required information to them.

The Latest Problem

For the most part trial loan modifications started in July.  These trial modifications last three months.  If the people to whom these are given make their payments on time, they are supposed to be converted to permanent modifications.

No statistics have yet been released on how may trial modifications are being converted to permanent ones.  However in the last two weeks, information has been leaked that only 1% have been converted to permanent modifications.

Mortgage companies are again blaming the people for not submitting the necessary paperwork.  Housing Advocates and non-profit groups who represent people facing foreclosure are fed up with the companies.  They are clamoring for a change.  They want the administration to take more aggressive action to make sure that the companies modify loans for people as required.  The administration should run the program and make sure that people facing foreclosure should get the modifications that they need.

The Treasury’s Response

On Monday, November 30, officials from the Treasury Department took the nest step to prod mortgage companies to help people facing foreclosure.  They announced that they were going to monitor the mortgage companies more closely.  They threatened to penalize companies that don’t do enough to help people requesting modifications.

They added that they are going to issue report cards to mortgage companies and there will be consequences including financial penalties and sanctions for those which perform poorly.

The mortgage companies need to be brought under control.  They need to be working with everyone to help people facing foreclosure save their homes.  They cannot continue to work against them each step of the way.  Those companies that don’t change should have to pay large financial penalties.

Changes in the Making Home Affordable Modification Program are being made very slowly.  There is no indication of when this program will start to work as it was intended to.  Until that occurs, people facing foreclosure who apply for loan modifications will continue to experience the same challenges that people are experiencing right now.

If you are facing foreclosure, don’t expect that you will have it easy.  Expect to do battle each step of the way.  Don’t try to negotiate a loan modification by yourself.  Get a lawyer or an expert in loan modifications to help you.  Also find out as much as you can about the foreclosure process and steps you can take to save your home.  There is much information on this in my EBook.  Please check it out by clicking Stop Foreclosure.

Much Success,

Mark Elkins

You probably know already.  I recommend that people who are facing foreclosure and who want to save their homes get help from either a lawyer or an expert skilled in loan modifications.  The reason I do this is simple.

Represented People Are More Likely to Save Their Homes

On November 18 NeighborWorks America sent out a press release.  In this they commented on the results of the program they run for the Department of Housing and Urban Development.  During the first year of this program, January 1 through December 31, 2008, people facing foreclosure who were represented by experts at agencies in the program were 60% more likely to save their homes than those people who tried to do it on their own and did not get help.

Here is what their study found:

Represented people were 60% more likely to save their homes from foreclosure than those who were not represented.

These people were provided the information, assistance and guidance they needed to help them find a solution to foreclosure.

These people were more likely to be given a loan modification than those who were not represented.

Those who had their loans modified had their monthly payments reduced an average of $454 more than those who got modifications without representation.

What is This Representation Program?

If you go to the website for the Making Home Affordable Modification Program, www.makinghomeaffordable.gov, look at the very top almost in the middle of the page. You will see Find A Counselor.  If you click on that you will be taken to a page which talks about the free counseling thru HUD.  If you click on Find a HUD-approved counselor there, you will be taken to another page there you can get the counseling agencies by state.  This program is run by NeighborWorks America and is the one they talked about in their press release.

The Surprising Thing about These Numbers

Yes, there is something surprising.  These are the results from last year.  Last year there was no real focused effort to help people save their homes from foreclosure.  There was no Making Home Affordable Modification Program. 

On the majority of loan modifications that were done the mortgage companies were still trying to recover all of the money that people facing foreclosure were behind in their payments.  The companies tacked penalties and interest onto this.  Normally the monthly payments were increased – not reduced.

The Results Now Have To Be Better

With the severity of the foreclosure crisis and the Making Home Affordable Modification Program there has been far more attention on helping people save their homes from foreclosure.   More loans are being modified now.  The reductions in the monthly payments are far greater now than they had been.

So we can only assume that the gap has widened.  People with representation have to be fairing much better than those not represented.

One Would Also Have to Believe That . . . .

Those people represented by lawyers have to be fairing much better because lawyers normally would be able to accomplish more than experts without law degrees.  Because representation by lawyers is primarily a local matter and no nationwide organization is responsible for overseeing this, I doubt that we will ever see how effective lawyers are in getting their clients loan modifications.

You Can Choose to Do What You Want

However if you are serious about saving your home from foreclosure, you will be far better off asking a lawyer or an expert in loan modifications to represent you.  You have too much to lose if you represent yourself.

If you want a lawyer or an expert in loan modifications to represent you, remember that you still want to control your case from beginning to end. You do that by learning as much about the process and the steps you can take to save your home.  There is much information on this in my EBook which you might find valuable.  You can find out more about it by clicking Stop Foreclosure.

Much Success,

Mark Elkins

On Thursday, November 19, a judge in Suffolk County New York handed down a decision which shocked the mortgage industry to its core.  The judge wiped out the $525,000 payments a couple owed on their mortgage.  As a result of his decision, they now own their home free and clear.

What Led to This Monumental Decision?

Diane Yano-Horoski and her husband Greg Horoski bought their home 15 years ago for less than $200,000.  In 2004 they refinanced their mortgage for $292,500.  Their new mortgage was a subprime loan through Deutsche Bank.  The interest rate on this loan was adjustable.  It started at 10.375% and soared to 12.375%.

Deutsche Bank sold the mortgage to IndyMac Bank.  When IndyMac went bankrupt, the servicing of the loan was picked up by OneWest, a California bank.

Greg Horoski had health problems.  Because of these the couple started to have trouble making their monthly payments.  In July of 2005 IndyMac sued Diane and Greg.  In January of this year a foreclosure was approved. 

At that time Diane asked for a court settlement conference.  This was available to them under a 2008 law.  The law indicated that people with subprime loans who were facing foreclosure could request court supervised mediation.

OneWest Refused to Cooperate

The judge called OneWest’s conduct on the case unconscionable.  He said that the company

• repeatedly refused to work out a deal,
• misled him about the amount of money owed, and
• mistreated the couple during the months of the hearings. 

In his decision he said that OneWest had to be sanctioned and deterred from abusing the couple again.  With that he wiped out the balance of the principal owed which was about $291,000 and interest and penalties amounting to $235,000.  The Horoskis now own their home free and clear.

Apparently OneWest is involved in a similar case in California.  There the company is trying to foreclose on an 89 year old woman even though there are two court orders telling them to stop. 

A Significant Change

Throughout the foreclosure crisis mortgage companies have been able to call the shots.  There have been many complaints by people facing foreclosure and trying to save their homes about how poorly their mortgage companies have treated them.  However, the mortgage companies did very little about this.

There are many posts about this on my blog.  Here you will also see that mortgage companies frequently have only responded when there has been a public outcry about what they have done to individual people.

State Courts Have to Step Up

Many people are unaware.  States have jurisdiction over foreclosure matters.  This dates back to the time when mortgages were done by local banks.  The banks loaned the money for the mortgages out of their own money.  When people made their monthly payments, their money was actually used by their local banks to make other loans.

Since this was local money, the banks were regulated by state law.  So foreclosure naturally fell under state law too.

Over time the system changed.  Now while a bank or a mortgage company loan money for a mortgage, that is not out of the money the bank or the mortgage company has.  The mortgage is sold to investment firms on Wall Street and these firms, in turn, see it to investors.  One mortgage can actually be owned by many different investors.

Although this change has occurred, the laws never changed.  While the mortgage industry now should probably be regulated by the federal government, it still is regulated by the states.

If people facing foreclosure are having problems trying to get loan modifications from their mortgage companies, state courts need to deal with this.  Up to the present time there have been very few cases where this has been done.

One thing is certain – the decision by this judge in New York has been monitored by lawyers everywhere.  His decision will be reviewed closely.  In the future there will probably be many more suits filed against mortgage companies over how they have refused to work with people facing foreclosure and how they have mistreated them.

If you have requested a loan modification from your mortgage company and you feel that they have mistreated you or refused to work with you, you may be able to take legal action against them.  Please consult a lawyer who specializes in foreclosures on this. 

Regardless of where you are at in the foreclosure process, you need to know as much as you can about the process and steps you can take to save your home.  This is not a complicated subject.  You can become an expert in a short time.  I have written an EBook which will give you much of the information you need.  If you want to find out more about it, please click Stop Foreclosure.

Much Success,

Mark Elkins

There is an important notice on the website for the Making Home Affordable Modification Program that I needed to bring to your attention.  If you applied for a loan modification under this program and were approved for a trial loan modification prior to October 1, 2009, here is the notice on the website:

“If your first Trial Period Plan payment was due on or before October 1, 2009, the deadline for signing an agreement for a permanent Home Affordable Modification is December 31, 2009! If you do not sign a Permanent Modification Agreement by this deadline, you may lose your eligibility for a Home Affordable Modification.”

The Treasury Department predicted that by the end of this year, on 375,000 loans trial modifications would be converted to permanent ones.  As of mid November, it was estimated that only 1% or somewhere between 3,750 and 6,500 were converted to permanent modifications.

As you can see, the number of permanent modifications thus far is almost non-existent.  Not only may there be far fewer than 375,000, the actual number may be just a fraction of that.  The Treasury Department is concerned and is looking for answers.

Needless to say the mortgage companies are claiming that they are not responsible for this.  They have said that most of the people with trial loan modifications have not sent them the necessary paperwork to convert the modifications from temporary to permanent.  

If your trial loan modification started prior to October 1 and you have heard nothing about a permanent modification there are two steps for you to take:

1. Verify that you have sent all of the documents to your mortgage company that they require.  Please click here. You will be taken to the “Request a Home Affordable Modification” page.  Go through and make sure that you have sent your mortgage company all of the documents asked for on that page.
2. If you have submitted all of the documents required and still have not heard anything, contact your mortgage company and ask them what they need from you to make the modification permanent.  One form they require is a Permanent Modification Agreement.

Please make sure to make notes of any conversation that you have with people at your mortgage company.  Get their name and phone number and write down what they tell you.

If they ask you for more documents, get these to them as quickly as possible.  Keep copies of what you send them.  Also make a note of when they were sent.

If you need help with any part of this, call 1-888-955-HOPE (4673).  This is a toll free call.  Ask for MHA HELP.  A HUD-approved housing counselor will assist you.  The counselor’s services are free.

The mortgage companies have stonewalled the Making Home Affordable Modification Program right from the start.  It is hard for me to believe that the reason that there have not been more permanent loan modifications is that people have not followed through and submitted required information.

I am sure that as time goes by we will find out that the mortgage companies did not follow through on what they were supposed to do.  There will probably be many instances where they have lost documents which have been submitted to them.  There will probably be instances where they never requested documents they needed. 

The sad thing is that some permanent modifications won’t be approved.  Most probably the mortgage companies’ will be at fault.  However, there won’t be any way to prove that they were responsible.  Don’t let this happen to you.

If you have followed the posts here on my blog, you have seen that the mortgage companies have not made it easy for anyone facing foreclosure to get a loan modification at any point in the process.  Can you see why anyone who tries to represent themselves is more likely to have many severe problems getting their loan modified? 

If you aren’t represented, get a lawyer or an expert in loan modifications to help you.  Also learn as much about the process and the steps you can take to save your home as you can.  You will be one step ahead of the people at your mortgage company.  I invite you to check out my EBook.  You can get more information on it by clicking Stop Foreclosure.

Much Success,

Mark Elkins