Interesting article in USA Today about pending lawsuits filed by homeowners who jumped through all the hoops to get a HAMP loan modification, were given a trail modification which they successfully completed, only to be turned down and told to immediately pay the difference between their trail payments and their higher original payments or lose their home to foreclosure. Now why would banks do such a thing?
The lawsuits allege servicers are purposely denying permanent modifications and keeping loans in default so lenders can profit from heftier late fees and other charges.
Allegedly,
When homeowners are denied permanent modifications, even those who were current before going on reduced-payment trials are considered in default, and servicers tell them they must immediately pay the difference between their trial payments and their higher former payments to avoid foreclosure.
Now here is where I think the banks could be doing something truly despicable. One of the determining factors for denying a permanent loan modification has to do with a formula for calculating the value of the modified mortgage versus the proceeds from foreclosure. I suspect the banks know very early on in the process whether the proceeds from foreclosure are greater then the value of the modified mortgage and quite possibly choose to string the homeowner along and extract every possible dollar they can out of them while intending to foreclose regardless. All the while, the homeowner is lead to believe they will get to keep their home if they make the modified payments only to have the rug literally pulled out from under them at the last minute.
Pretty crappy thing to do and I wouldn’t put it past them.