Lender Errors cause Modified Loans to not meet three month trial period

Homeowners who are seeking relief under The Obama Administrations loan modification program are hit with yet more frustrating setbacks caused by the lenders.

Towana Gooch is a prime example of what homeowners are being hit with now in their fight to keep the roofs over their heads. Ms. Gooch is a single mom of a ten year old little girl and was on the brink of losing her townhome. The townhome is located in suburban Maryland and according to Ms. Gooch it was rejected from the loan modification program over a seven cent error which the lender created.

American Servicing Company told Ms. Gooch that she no longer qualified for the loan modification program because the automatic payment received from her bank account was short by seven cents. The payment they say should have been for nine hundred thirty eight dollars and seven cents. Ms. Gooch who had received notification last month that her she qualified for loan modification and that the payment would be reduced to nine hundred thirty eight dollars made arrangement to have the payment automatically withdrawn from her bank account. She did everything required by the lender. Ms. Gooch felt that she was okay and continued to place her effort on finding employment as she lost her position as a recruiter earlier in the year. She was confident that with the mortgage issue under control that there was no need for a plan B until she received the notice in regard to the seven cent error which the lender stated disqualified her from the program. American Servicing was scheduled to foreclosure on her property on October 16^th.

Ms. Gooch is not alone in her saga; many qualified homeowner are being rejected from the program due to errors by the lender. The homeowners have had no course of appeal. Lenders up until last month did not have to reveal to homeowners why they did not qualify or why they were rejected from the program.

Associate Director of the California Reinvestment Coalition in San Francisco, Kevin Stein says that if the servicing company makes an error, even if the error is by accident, there is no recourse or appeal process in place to handle the issue and the homeowner end up back in the situation they were in before. What is worse is the lenders for their part is not fined and have failed to complete what they promised to do.

Officials at the Government level are not able to determine how many homeowners have been rejected from the program due to lender or servicer errors such as typo’s, lost of fax documents or oversight by an employee. The Treasury however does agree that many homeowners have been unjustly rejected from the program that center on such errors.

The Treasure department requested Freddie Mac in August of this year to begin auditing all lenders in the program and do a second look. Treasury spokesperson Meg Reilly stated that they are still determining the scope of noncompliance in the program from lenders. Freddie Mac is currently reviewing over one thousand mortgage modification files per week and at this point has no reliable figures to the mistakes lenders have made. She stated that on every case they have received were an eligible borrower has been denied modification they have worked with the lender and servicer to correct the issue.

The Government Accountability Office has provided over one million dollars to lenders in investment subsidies and incentive payments through the Home Affordable Modification Program. The program was initiated by President Obama in March at the cost of fifty billion dollars to entice lenders to modify home mortgages rather than foreclose on homeowners. The program set a certain criteria in order to qualify for the modification and was slow to get up and running. The Treasure Department figures show that currently half a million homeowners are enrolled in the program under a three month trial modification, which according to the department is a goal set ahead of schedule.

The Executive Vice President for the National Community Reinvestment Coalition, David Berenbaum say that NCRC is receiving an ever increasing number of complaints involving lender mistakes as the program continues to gain momentum.  He believes the program derives from lack of training of mortgage counselors at the lending institutions and the volume of modification applications coming in.

The Coalition has been working with Ms. Gooch and believes under the guidelines she meets the income requirements. Berenbaum stated that they have to fight for every modification or refinances in over half the case they receive.

The government for its part has created a hot line that receives complaints however many doubt its ability to sort out complex mistakes done by the lender. The Treasure Department created a special phone number for appeals in extremely urgent cases but it is only available to certain housing counselors.

The governments has directed lenders to create an appeal process within their companies and by December of this year are required to report why homeowners were rejected or not offered relief under the program. The government intends to make the reports public in order to further entice lenders to modify mortgage loans. The government also would like to impose penalties on lenders who deny applicants unjustly. The penalties would involve requesting incentive monies be returned or removing them from the program. Freddie Mac will be in charge of handling how these penalties will be enforced and how lenders will be punished.

Lenders contend that they are working on the issues surrounding their mistakes and overwhelming volume of loan modifications; however with the governments ever changing guidelines it has been difficult to manage. Wells Fargo & Co. hired over five thousand eight hundred people this year to handle the loan modifications and there review. Wells Fargo & Co says they have also initiated their own appeals process.

Ms. Gooch’s loan however received notice that her foreclosure has been placed on hold until further review could be done. The notice came after Associated Press contacted the America’s Servicing Company who handles her loan. The bank also reimbursed her the nine hundred and thirty eight dollar payment. She was told that she will likely be placed back into the program; she is not excited and is waiting to see it in writing.