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Bank loan modification errors and absurd document requests

Sarah Larson had been trying for months to get a break on her mortgage payments when a letter from her bank arrived in March.

Sitting at the dining-room table of her Minneapolis house, the 33-year-old acupuncturist ripped open the envelope and pulled out a list of important documents demanded by Bank of America Corp.

Bank statements. A utility bill. Her death certificate.

Ms. Larson, who was struggling to make her $1,055-a-month mortgage after client appointments dropped off by half, is in good health. So she replied to the nation’s largest bank in assets with a letter.

“I am not sending a death certificate because I am not deceased,” she wrote. “I am currently still living.”

Turns out the bank had erroneously asked for proof of her demise—the sort of paperwork snafu that has roiled applicants since the Obama administration’s foreclosure-prevention plan was announced in February 2009.

Lenders often appear clueless as to the HAMP rules

Across the nation, applicants are flush with tales of the absurd. Lenders and mortgage-payment processors—sometimes in error—ask borrowers to demonstrate the impossible. Or they ask them to verify events of many decades past.

How you can force your loan servicer to get off the dime and approve your loan modification - especially if they have been jerking you around

  • In your loan modification application, include a Qualified Written Request that requests a copy of the note. This is the note that is referred to in the video segment. If they cannot produce it, which is highly likely, you've got leverage against them to negotiate aggressively, ie, get a principal reduction along with better interest rate terms. This will likely an in-house modification deal, not a HAMP deal.
  • NEW: Robo-signing scandal may give legal leverage for approval Read More Here
  • Watch the Q&A Coaching Videos for more help:
# HowTo Package Your Loan Mod Application Kit
# HowTo Phone Negotiation Tips
# HowTo Complain & Motivate When Getting the Run Around
# HowTo Follow Up by Phone, Fax, Mail
# HowTo Use a Qualified Written Request
# HowTo Fight Rejection Tactics
# HowTo Stop a Foreclosure Sale In 1-Day

Reason for loan mod rejection: His wife’s death was a “short-term hardship”

In Cleveland, a borrower represented by a housing-counseling agency called Empowering and Strengthening Ohio’s People initially was rejected for a loan modification. The reason cited by his bank: His wife’s death was a “short-term hardship,” according to an email sent by the bank.

“His hardship was that his wife died,” says counselor Robert King, who successfully pushed to reverse the decision. The family had lost half its income upon the wife’s death, and the borrower had exhausted other means of paying the mortgage, Mr. King says.

78 year old couple required to show proof of retirement income

Aurora Loan Services recently wanted Wanda and Marlyn Behrendt of Harris, Minn., both 78 years old, to hand over proof of her retirement income, even though she retired in 1993 from her job soldering circuit boards for Unisys Corp.

Her tax documents and bank statements weren’t proof enough.

“I don’t know if they think we are trying to pull the wool over their eyes, but we certainly aren’t,” Ms. Behrendt says. She finally managed to get a personal identification number from her old employer that allowed her to access the retirement documents needed to complete the application.

Aurora, based in Littleton, Colo., is allowing the couple to make reduced mortgage payments while it decides whether they qualify for a permanent modification. A spokeswoman says the company abides by all government guidelines.

Don’t overcomplicate the process

To modify a loan, mortgage companies must verify a borrower’s income, residence and financial hardship. Borrowers can be asked for additional documents for various reasons. “We keep stressing: Don’t overcomplicate the process,” says Laurie Maggiano, director of policy for the Treasury’s Office of Homeownership Preservation.

Treasury officials say start-up challenges were inevitable, adding that they continue working to strengthen the program.

Wrong language documents

J.P. Morgan Chase & Co. has long marketed to Spanish-speaking clientele and maintains a Spanish-language website. But in an April email to Bertha Cueva, a counselor from the bank expressed confusion over her retirement documents from the Social Security Administration.

“Bertha, I did receive the 4506 and SSI form but it was not in English!” the counselor wrote.

“You can tell it’s a Social Security letter,” Ms. Cueva’s daughter says. “It’s just in Spanish. That doesn’t mean she’s not going to receive the money.”

A spokesman for J.P. Morgan says it has “many bilingual loan counselors” and processed Ms. Cueva’s loan-modification request “using the Spanish-language documents.”

Ms. Cueva’s daughter says her mother was recently denied a loan modification because her income wasn’t sufficient and will have to move out of the home in the next few months.

In some cases, applicants’ spending patterns are scrutinized in ways they find perplexing.

David Rodriguez-Cruz was denied a loan modification on his two-bedroom San Diego home this spring. He says a Wells Fargo & Co. employee told him he spends too much on gasoline—but not enough on household utilities.

“We spend more time outside the house,” says Mr. Rodriguez-Cruz, who has a one-hour round-trip commute from his job as a refrigeration technician near the Mexico border.

A Wells Fargo spokeswoman says the bank “must be able to document that the customer is facing a true hardship … [and] determine if the customer can make the payment on his or her own without our help and, if not, what payment he or she can afford.”

As for the still-living Ms. Larson, a Bank of America spokeswoman says an outside vendor hired to help collect her documents “erroneously included a death-certificate request in a document collection letter for a small group of customers.”

The “majority of affected customers” were sent a corrected letter and got a follow-up call, the bank spokeswoman says.
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Source: http://online.wsj.com/article/SB10001424052748704421304575383540017919202.html


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3 Responses to Bank loan modification errors and absurd document requests

  1. [...] This post was mentioned on Twitter by Roy Hughes, Gail Simmons. Gail Simmons said: Bank loan modification errors and absurd document requests http://bit.ly/bPCmTq #loanmodification [...]

  2. Garcia on 26/01/2011 at 22:18

    We got a loan modification about a year ago . We were on the trail payment for about a year and three months ago Bank of America told us that our first payment was due on march 2011. That our trail payments cover our mortgage until march 2011. That we didn’t have to pay Nov, Dec,Jan. We have documents stating this..We call Bank America and they told us the same thing. My husband check our mortgage status and it shows that we are Now three months behind and they want the money for the last three months, after they told us and verified the documents we got in the mail were correct.My husband called Bank of America and asked them what is going on? they told him they have made a mistake on there side . I am so upset because we could lose our home. We don’t know what to do… I need some advice.:(

  3. Gail Simmons on 28/01/2011 at 10:32

    Dear Marlene,
    I am so sorry to read of your ordeal with BofA. They made a mistake, did they?

    When you order a forensic audit on your loan with them, I’m sure you will find many mistakes by BofA that will be considered mortgage fraud.

    This will give you the leverage to negotiate your loan mod – maybe even wipe out your mortgage altogether and get some money damages – depending on how far you want to push BofA. Did you get my special report yet with details on what you can do to fight back?

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