The Trouble With Trial Mortgage Loan Modifications

Image courtesy WSJ.com

These days there seems to be no shortage today of people or politicians angry at mortgage companies.  Most however tend to be  customers of the nations five largest mortgage servicers;

Bank of America, Wells Fargo Home Mortgage, JP Morgan Chase & Ally Financial.

The source of anger tends to be  focused on  foreclosure, short sale request or loan modifications aka work-outs that never seem to get worked out and result is foreclosure.

But the troubles aren’t limited to just the big banks or nameless faceless individuals as in the case of an acquaintance of mine who we will call Kyle who lives in Garner, North Carolina.

Kyle’s mortgage loan is serviced by SunTrust Mortgage but owned by Fannie Mae. His case embodies what is wrong with today’s mortgage industry; it is simply overwhelmed and too busy to act responsibly as senior participant to the mortgage covenant. *In the interest of disclosure, until recently I had been employed by SunTrust Mortgage as a mortgage loan officer.

It was mid May when Kyle walked  into the Garner SunTrust  branch desperate for help. Little did he know that I would be in the branch that day. Little did he know because although I live  near that branch I did not work at that location and apart from being members of the same 700+ member church we really don’t know one another except for passing in the pews on Sunday, nor did he know  I was employed by SunTrust. Needless to say he was relieved to see a familiar face.

Trial Loan Modification

Prior to entering into a trial loan modification Kyle was and had always been current on his mortgage and all of his credit obligations. Like most people today Kyle understands the value of good credit and demonstrated so much by having a high credit score so like any good loan officer and with his permission I verified this to be true before lifting a finger to help.

After attempting to refinance his loan to reduce his mortgage payments and learning that he couldn’t because of a real estate market whose pendulum was swinging in the opposite direction he was offered a trial loan modification. Kyle showed me documentation from both Fannie Mae and  SunTrust that he had been successfully entered into a trial period  loan modification workout and made all the payments as agreed for 15 months.

Like most Americans Kyle is employed in the small business sector of the economy and himself happens to be a small business owner who employs others. The new trial modified mortgage payments were nearly $1,000 per month less than his original promise to pay. Of course this was a huge assist to his family who had seen their income greatly reduced because of the so called Great Recession.

Even though Kyle was making the newly agreed payments as agreed,  SunTrust Mortgage began to report to the credit bureaus and more important to Fannie Mae that he was delinquent on his mortgage payments the amount which was the difference between the original payment and the new trial amount or roughly $1,000 each month.

Loan Modification Denied

After more than a year of making the new payments under the “trial modification” SunTrust notified him that because his loan was delinquent and because his income has declined  he was no longer eligible for the loan modification and because of these reasons they were taking his loan out of the program. Soon after he began to receive demand for payment for the entire past due amount caused by participating in the trial work out.

In May I called the loss mitigation department at SunTrust and I was told by a co-worker there had been a data entry error that caused the problem and was even given the specific date and computer coding  associated with that error.  I was given the team members unique computer ID and even though I was in possession of a written authorization from Kyle to discuss his loan  I was told that Kyle needed to call them to correct it.  It didn’t make sense to me at the time but I forwarded the information to Kyle confident that I had helped him to resolve this issue.

Foreclosure via Loan Modification

After church service last week Kyle told me that he was afraid he would lose his family’s home to foreclosure because SunTrust has refused to take any more payments unless he can pay the lump sum of the arrears which now is nearly $17,000.  My friend is facing foreclosure because he participated in a trial loan modification that he was later deemed ineligible by what appears to be a mistake on the part of the lender. Making matters worse  he has been unable to find a single person in the Loss Mitigation or Foreclosure departments of SunTrust Mortgage who will help him to save his home from foreclosure.

Kyle recounted to me  from a recent telephone conversation with a Loss Mitigator at SunTrust in which he was told the reason that SunTrust will not not take any more payments from him is because they can’t begin the foreclosure process until he is at least $20,000 arrears in payment. Because I didn’t work in the Loss Mitigation or Servings department I can’t say for sure if that is a SunTrust  company policy or not but I know Kyle and everything that he has told me has been true.

As a mortgage professional I am ashamed by what is happening to my friend because I know this is only one case of perhaps thousands and I know that not everyone “knows” someone at the bank like Kyle does. Although  I get it that the that mortgage industry is overwhelmed but this  does not excuse us from taking extraordinary steps to protect the private property rights of persons who have placed their faith and trust that their lenders will act soberly and responsibly and for this reason SunTrust has earned a spot on the Mortgage Wall of Shame!

Private property and the protection thereof is the hallmark of this experiment in liberty that we call theses United States of America. Without it we are no different than any other country in the world. The Deed of Trust that Kyle signed (mortgage) required that Kyle take reasonable steps to protect that Lenders security interest in his property that he had pledged to SunTrust.  I argue that because the mortgagee is the greater of the two parties the same and more applies to SunTrust Mortgage.

Because of the recent robo-signing scandals at the big banks it is my opinion that if  banks and mortgage lenders plan to continue to use the courts to take that which is not theirs but has been pledged in order to satisfy a debt then they better have each “I” dotted and each “T” crossed.  In Kyle’s case it sounds pretty sloppy at best.

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