Under new rules, loan modification won't protect you from foreclosure

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Under new rules, loan modification won’t protect you from foreclosure

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Piggybankblog posted on 08/13/11

Picture posted by piggybankblog

Cross linked story with sun-sentinel.com

Many South Florida homeowners facing foreclosure may believe getting a preliminary loan modification offer from their lender will save them from losing their home. But, in fact, new rules approved by Fannie Mae allow lenders to continue foreclosure proceedings on those who haven’t made a mortgage payment in more than 120 days.

Those homeowners are safe only when they go back to regularly paying their mortgage, which typically happens only after a permanent loan modification is in place.

In June, Fannie Mae, which backs many mortgages in South Florida and across the country, ordered lenders not to start foreclosures on homeowners who are less than 120 days behind. Instead, lenders must offer loan modifications or other solutions.

But that’s not the case for those who are at least four months behind in their payments. Lenders can continue with the controversial “dual tracking” for them, so struggling owners can be paying in a trial modification program while going to court to fend off foreclosure.

With Fannie Mae’s backing, lenders won’t call off a foreclosure, until those homeowners prove that they can make the cheaper monthly payments, said Fannie Mae spokesman Andrew Wilson.

“We don’t want foreclosures to happen; we want to prevent them from happening but at some point it becomes necessary to proceed with foreclosure,” Wilson said.

Under the new policies Fannie Mae adopted in June, lenders can be stricter with owners with more delinquent loans — and that includes tens of thousands of Floridians, with the state leading the nation with foreclosure cases.

About 149,000 Florida mortgage holders were delinquent more than 90 days in the first quarter of this year, according to the Mortgage Bankers Association. A majority of the delinquent loans in the state are at least 90 days late, the association said. It does not have statistics for loans more than 120 days delinquent or for how many are in South Florida specifically.

In the past year, many South Florida homeowners have reported lenders have proceeded to foreclose on their homes, even though they have sought or secured preliminary loan modification agreements. Homeowner advocates have said many people may mistakenly believe such an agreement can save them from foreclosure.

Broward teacher Saint-Pierre Pierre, 40, is one of those late payers caught in what he considers a scary, confusing web involving Broward County foreclosure courts and his lender. He is making payments under a preliminary modification plan for his home in Pompano Beach. Meanwhile, he files court briefs on his own — he says he can’t afford an attorney — to fight off foreclosure. “I don’t want to walk away from my home,” Pierre said.

Pierre, who teaches history at Stranahan High, said he thought he was protected from foreclosure if he enrolled in a loan modification program. But Fannie Mae lenders will cancel foreclosures only when homeowners start on a regular permanent payment plan, Wilson said.

Pierre, who started a second job teaching at Broward College, has made the first two of three payments in his trial period, Wilson confirmed. PHH Mortgage first offered Pierre new loan payments in late May.

“We want to continue to work with you to modify your mortgage and help make your payments more affordable,” the lender wrote Pierre in a letter. PHH Mortgage told Pierre that if he made three trial payments of $1,146.61 — about $400 less than his original payment — then “your mortgage will be permanently modified.”

Pierre said he had been asking for two years to have his payments permanently reduced after his income dropped about 20 percent when Broward Public Schools could no longer afford to pay him and other teachers to work extra hours. His income fell from $66,309 in 2008 to $52,837 in 2009.

One early loan modification offer was rescinded. Then PHH Mortgage, he said, lost paperwork he sent in to apply for a new program. “They asked me to resend it four or five times,” he said. He hadn’t paid his mortgage for two years, because Pierre said he kept waiting for a new payment schedule.

So, he said he was thrilled to finally get a new offer in the mail. Then Pierre said he was surprised to receive a letter from attorney Lara Diskin informing him that PHH Mortgage would ask at a July 21 hearing for a summary judgment to foreclose on his home. The lender had started foreclosure in late 2010.

Broward Circuit Judge Maria Garcia-Wood set a December date for the house to be sold on the courthouse steps.

Dico Akseraylian, vice president of PHH Mortgage communications, said his company could not cancel Pierre’s foreclosure proceedings until he paid the final trial payment due Sept. 1. Pierre said he mailed the final payment Friday. If he did, then the foreclosure will be called off and his house won’t be sold, Fannie Mae spokesman Wilson said.

Meanwhile, Pierre plans to ask Garcia-Wood at an Aug. 19 hearing to reconsider her final foreclosure judgment. “I live at the courthouse,” he said. “It’s been a running circle. It’s driving me crazy.”

Where to find help

For information on loan modifications or other programs to help struggling homeowners, go to knowyouroptions.com that has a number of resources, interactive tools and other information for homeowners

You can call toll-free 877- 208-3652 to set up an interview to talk about your loan. The help center’s email address is south_florida@fanniemae.com

dgehrke@tribune.com or 954-356-4205

 

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6 Comments

  1. Rayanne Jackson says:

    Chase loan modification is a big JOKE… They have the most incompetent people working for them…uninformed, non communicating and terribly rude. My son has been jumping through hoops since March 2011 trying to obtain a modification and for one reason or another always has to resend a document several times because they supposedly never got it although the transmission says it went through. Chase gives people a false sense of hope to hold onto their homes. Not everyone out there WANTED to become employed. Lets thank our elected officials! Promised change and boy did we get it!

  2. Rayanne Jackson says:

    Chase loan modification is a big JOKE… They have the most incompetent people working for them…uninformed, non communicating and terribly rude. My son has been jumping through hoops since March 2011 trying to obtain a modification and for one reason or another always has to resend a document several times because they supposedly never got it although the transmission says it went through. Chase gives people a false sense of hope to hold onto their homes. Not everyone out there WANTED to become employed. Lets thank our elected officials! Promised change and boy did we get it!

  3. Apada says:

    I guess this means if you were doing your modification while IN the period where you were protected against foreclosure, you’re just out of luck?

    They stopped that for a reason – because banks were deliberately dragging out the application process UNTIL the homes went into foreclosure. If the banks have all the control, they win the game. But, I guess they know that.

    I am now certain that we were never meant to benefit from this program. I’m not sure why they did this and ruined so many people’s lives who would not have even applied had they not been offered this as an option, but whatever the reason(s), benefiting the homeowner was not one of them.

  4. Apada says:

    I guess this means if you were doing your modification while IN the period where you were protected against foreclosure, you’re just out of luck?

    They stopped that for a reason – because banks were deliberately dragging out the application process UNTIL the homes went into foreclosure. If the banks have all the control, they win the game. But, I guess they know that.

    I am now certain that we were never meant to benefit from this program. I’m not sure why they did this and ruined so many people’s lives who would not have even applied had they not been offered this as an option, but whatever the reason(s), benefiting the homeowner was not one of them.

  5. peg says:

    exactly my thoughts Apada. Not sure what period we are in as we are at 2months behind and on our 2nd try at a mod. One thing I have noticed both on this article and with other people close to me that did go through foreclosure is the statement of not paying a mortgage payment for from months to like this article 2 years. What??? How??? I mean we went thru this in 2004 and was able to pull out of it only thanx to relatives that helped with the extreme costly expense and delay even so that the attorney could reap more extra fees to stop it.
    went on autopay program and all was well until the bank glitched it – now in a mod nightmare but what I am saying is BOA is on this at 3 months period – how is it possible these people could go so long without any payment at all and stay in the home till the end is beyond me. Maybe the process is different depending on lender? I don’t know but I wish they would back off in my case atleast till it hit 4 months (which it won’t for sure- but you know what I am saying its a buy time thing) because my goal is to get back to working (went from 2 income household to 1) and get the payment caught up and back on the autopay program that we had before they messed it up.

  6. peg says:

    exactly my thoughts Apada. Not sure what period we are in as we are at 2months behind and on our 2nd try at a mod. One thing I have noticed both on this article and with other people close to me that did go through foreclosure is the statement of not paying a mortgage payment for from months to like this article 2 years. What??? How??? I mean we went thru this in 2004 and was able to pull out of it only thanx to relatives that helped with the extreme costly expense and delay even so that the attorney could reap more extra fees to stop it.
    went on autopay program and all was well until the bank glitched it – now in a mod nightmare but what I am saying is BOA is on this at 3 months period – how is it possible these people could go so long without any payment at all and stay in the home till the end is beyond me. Maybe the process is different depending on lender? I don’t know but I wish they would back off in my case atleast till it hit 4 months (which it won’t for sure- but you know what I am saying its a buy time thing) because my goal is to get back to working (went from 2 income household to 1) and get the payment caught up and back on the autopay program that we had before they messed it up.

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