Miscalculations by Wells Fargo & Co. cost 400 homeowners their homes, according to a regulatory filing made at the beginning of the month.
From 2010 to 2015, the bank made miscalculations when determining whether borrowers qualified for loan modifications. The bank then foreclosed on those homeowners after improperly denying them loan modifications that could have allowed them to stay in their homes.
The bank said it has set aside $8 million to compensate those customers affected by the miscalculation. That amount roughly works out to an average of $12,800 per borrower.
This is just the latest instance of consumer harm caused by glitches, poor oversight, and fraud at Wells Fargo.
Qualifications and Benefits with Loan Modification
A loan modification can help a struggling homeowner who is unable to make his or her mortgage payment. They can be used to avoid foreclosure, short sales, and even refinances.
If you are considering a loan modification you’ll need to know if you qualify and how it will benefit you. Here are some reasons you should consider a loan modification:
1. You are experiencing hardship. A hardship is something unexpected that has made it difficult for you to afford your mortgage payment. This can be a job loss, sudden illness, or death in you immediate family. You will need to write a letter to your lender that outlines the hardship circumstances, as well as shows you are suffering financial difficulty because of the hardship. This “proof” can be in the form of pay stubs and bank statements.
2. You have negative equity. Having negative equity means you owe more on your house than it is worth.
3. You have a sub-prime loan. A sub-prime loan is a bad loan. This happened during the housing crisis. Many people were offered poor loan products to borrowers. These loans have a high rate of default and thus foreclosures.
4. You are facing foreclosure. If you are facing foreclosure you can request a loan modification that will keep you from foreclosing. You will need to explain how the modification will help you. Because lenders do not want you to foreclose, often times they will work out an arrangement to help you stay in your home.
Navigating the Loan Modification System
Getting a loan modification can be anything but straightforward. These tricks can help you maximize your chances of navigating the process successfully.
Your Odds of Success
Through most of 2010, fewer than half of all loan modifications were successful. Knowing your odds will eliminate any unpleasant surprises.
The Home Affordable Modification Program (HAMP) is a voluntary program in which only Fannie Mae and Freddie Mac lenders are required to participate. Other lenders only participate if they want to. What that means is they can make up their own modification strategies and rules as. In addition to this, constantly changing rules make it difficult for mortgage lenders to update their procedures and thus train their employees accordingly.
Homeowners seeking HAMP modifications often report constant miscommunication and loss of documents on behalf of HAMP.
Here are some ways you can help your cause:
- Keep a file of everything you send to HAMP
- You should update and organize your file on a weekly basis.
- Weekly, call the lender in order to get the status of your modification.
- Make sure you pay your trial payments on time, every time.
Educate Yourself About the Latest Loan Modification Guidelines
Don’t assume your lender’s loan employees to be well versed in the latest guidelines. Don’t rely on their knowledge – do your own homework on HAMP. It is very common for applicants to receive different interpretations of the exact same rules from different employees within the same company.
If Denied – Reapply
HAMP guidelines do not include provisions for an appeal process. But you should know you are allowed to reapply after a denial if your circumstances have changed.
A mortgage modification can be worth the hassle because a successful loan mod can save you a lot of money as well as your home.
Persistently following these tips can maximize your chances of approval.
Refinancing means securing a new loan with a different, and even better interest term rate, new terms, and a new monthly payment. This option completely replaces the previous mortgage. The payment is made more affordable through either lowering your interest rate or adjusting the terms of the loan.
The first mortgage is paid off, which allows the second loan to be created. Borrowers with a good credit history often find refinancing to be a good way of converting a variable loan rate to a fixed rate, while also securing a lower interest rate. Refinancing can be a riskier choice for borrowers with less than perfect, or even bad credit, or too much debt. Refinancing will also not negatively impact your credit activity or history.
Even if the value of your home has decreased or if you are underwater and you owe more than your home is worth, you may be able to refinance your loan.
Home Affordable Refinance Program (HARP)
The government offers the Home Affordable Refinance Program (HARP) to help you refinance. This is a federal program that was created by the Federal Housing Finance Agency in March 2009 to help underwater and near-underwater homeowners refinance their mortgages. There are various places online where you can see if you qualify for HARP.
Typically, you will need to provide the following to see if you are eligible:
- Your most recent income tax return
- Information about any junior lien mortgage on the house
- Account balances and monthly payments for all of your debts
HARP can be a great option for struggling homeowners.
A repayment plan is an agreement between a homeowner and the mortgage lender where the homeowner pays the past due amount that is owed. It is used to help resolve the delinquency. Typically the past due amount is added on to mortgage payments—over a specified time period in order to bring the mortgage current. Essentially, a repayment plan allows a homeowner to catch up on your past due payments over an extended period of time. This is less damaging to a homeowner’s credit score than a foreclosure and also allows the homeowner to stay in their home while avoiding foreclosure.
A forbearance is when a mortgage company temporarily suspends or reduces a homeowner’s monthly mortgage payments for a specified period of time in order to allow a homeowner to get back on solid financial footing. Tax, insurance, escrow, or impound amounts can be suspended for a set period of time, which will help a homeowner stay in their home and avoid forbearance. This option is also less damaging to your credit score than a foreclosure.
Your lender will need to determine if you are eligible for a forbearance, but often that eligibility is based on a loss of income due to a number of things, including medical illness, death of a co-borrower, natural disaster, or unemployment. All of these circumstances must have a clear end so that the lender can set an amount of time.
If You Get Foreclosed On
Foreclosure is a frightening thing to face. But there are things you can do to avoid it. Here’s some more information on what foreclosure is and what you can do to protect yourself and your family.
Foreclosure Is A Process
Foreclosure is a series of events during which a lender attempts to recover the balance of a loan from a borrower who is unable to pay. There are phases to the foreclosure process that are determined by the state you live in. You should consult a foreclosure lawyer to help you understand your rights during this process. They’ll be able to advise you on your state’s laws.
If You Have to Sell
If you have to sell your home, chances are you’ll have a better chance of selling it if it has been kept in good condition. If you are no longer able to afford your home and are facing foreclosure, you might be eligible for what is called a “Short Sale.” Short sales are better than foreclosures.
What is a “Short Sale”?
A “Short Sale” (also known as a pre-foreclosure sale) is when you sell the home for less than the balance that remains on the mortgage. Even if you don’t think your home is able to be sold you might still qualify for this type of sale. Once your mortgage company agrees to the Short Sale, you’re able to sell the home and then pay off your mortgage (or at least a portion of the mortgage) will the proceeds.
You might be eligible to a Short Sale if :
- You’re not eligible for a refinance or modification of your mortgage
- You are dealing with a long-term hardship
- You have fallen behind on your mortgage payments
- You’re “upside-down” on your home, meaning you owe more than it is worth
- You have tried selling, but have been unable to sell your home for a price that covers what is owed on the mortgage
- You are no longer able to afford the home and are ready and need to leave it
A short sale allows you multiple benefits, including:
- The ability to eliminate or reduce your mortgage debt
- Avoid foreclosure
There are steps you can take to avoid home foreclosure. You should immediately contact your lender if your circumstances change due to a loss of a job or other unforeseen circumstances and you’re unable to pay. Remember that mortgage lenders would rather you stay in the home, rather than try to recoup the money on the loan via a foreclosure sale. Because of this, they are willing to work with homeowners that are willing to work with them. A lot of times mortgage lenders will still work with you even if you’ve missed three monthly mortgage payments.
The idea of losing your home to foreclosure is devastating. A lawyer can help you avoid foreclosure through looking at various viable options including a home loan modification or even bankruptcy in order to get you back on solid financial footing.
Working with an Attorney
If you are unable to keep up with your mortgage payments, you’ll want to contact a lawyer that can help you avoid home foreclosure. It is easy to feel helpless in a situation like this. The right lawyer can help save your home using a number of legal options, including Chapter 13 bankruptcy. At the law offices of RHM LAW LLP, we help the people throughout the San Fernando Valley, Los Angeles, Riverside, San Bernardino and Orange counties to avoid home foreclosure and get the debt relief they deserve. If you need to avoid home foreclosure and you have decided to pursue bankruptcy as an option or home loan modification, we will help you save your home.