Temporary Loan Modifications – the ultimate scam

I’ve seen a ton of horror stories in recent weeks with loan modifications, but this one takes the cake.  As a matter of routine,

Banks are telling homeowners they’re being considered for a loan modification, and their lawsuit is “on hold,” even though the banks’ lawyers are moving the foreclosure lawsuit forward, full speed ahead.

What particularly frustrates me about these situations, aside from the fact that banks are lying to homeowners time and time again, is that homeowners are pinning all of their hopes into a loan modification process that is an absolute scam.  It’s not just that the lawsuits are still going forward – the loan modification process itself is a joke!  As I’ve said before, hoping a temporary modification evolves into a permanent one is like waiting for Santa Claus to come down the chimney on Christmas Eve.

To illustrate, take a look at this Temporary Loan Modification that came into my office today from a potential client.  It requires the homeowner to make monthly payments in October, November, and December of more than $1,800/month.  What does the homeowner get in exchange?  Read the second page – absolutely nothing.  Wells Fargo has ”no obligation to enter into any further agreement.”  Hence, it has no obligation to approve a permanent modification, even if the homeowner makes all of the payments.  In fact, page two specifically says “the loan must be brought current or an arrangement to satisfy the arrearage must be executed.”  That means the homeowner has to pay up once the three-month period is over.  Even worse, “the lender, at its option, may institute foreclosure proceedings according to the terms of the note and security instrument without regard to this agreement.”  Yes, incredibly 

Wells Fargo is giving itself the right to foreclose even while this agreement is in place!!! 

In other words:

The foreclosure case against this homeowner can proceed, even if the homeowner is paying!! 

The document is titled “Forbearance Agreement,” but if Wells Fargo isn’t agreeing to halt the foreclosure, even temporarily (i.e. “forbear”), then what’s the point?  All this agreement does is put more money into the bank’s pocket – the end result of foreclosure is still the same. 

To illustrate, and this is the most sickening part of all:

Even after entering this “forbearance agreement,” and making the first payment, Wells Fargo still sold this home at a foreclosure sale! 

The homeowner paid the October payment early, in mid September, and Wells Fargo kept the check, but it still proceeded with the sale!   Think about that for a minute. 

This homeowner entered a temporary modification agreement, paid what she agreed to pay, and her home was still sold at a foreclosure sale!

Now for the legal stuff.  Let’s say I represented this client, filed a motion to vacate the judgment and cancel the sale, and the judge agreed with me.  Even if  I “won” and got the Final Judgment vacated, this agreement was only good through the end of the year.  Hence, even if this client “won” in court, come January, Wells Fargo could still set another hearing on a motion for summary judgment of foreclosure, and short of defeating summary judgment, there’s nothing this homeowner could do about it! 

I sincerely hope this example illustrates an important point; typically:

Temporary loan modifications are a SCAM

Usually, as we saw here, banks enter temporary loan modification agreements as a way to induce homeowners to make more payments, even as the foreclosure lawsuit proceeds full speed ahead.  I’m convinced banks do this without any intention of entering permanent, meaningful modifications (as homeowners want), but as a way to collect more money prior to a foreclosure being entered.  If you disagree, let me ask you:

How did this agreement help this homeowner? 

She paid more money and still got foreclosed! 

This brings me to the final, most important point of all. 

If your bank is proposing a temporary loan modification or forbearance agreement, make sure you bring it to a competent foreclosure defense attorney.  And do not, under any circumstances, let the bank convince you that your case is “on hold.” 

If a bank tells you your foreclosure lawsuit is “on hold,” tell them “Good, send me a letter saying so.”  When the bank refuses, that should be a wake-up call for you.  Chances are, YOUR CASE IS NOT ON HOLD!!  (Even if the bank agrees, and gives you proof in writing, I’d still be careful – I’ve seen instances where the bank put it in writing and still proceeded with the foreclosure suit.)  To sum it up:

Temporary Loan Modifications are a SCAM!

They put more money into the banks’ pockets and don’t keep homeowners in their homes.

Posted in Main | 3 Comments »

3 Responses to Temporary Loan Modifications – the ultimate scam

  1. steph says:

    The modification scam is out of control. So many honest innocent people have been falsly strung along thinking there was help out there in their time of need. In my case, I was informed of the HAMP program from my mortgage company. I have lived in my home for 12 years. I struggled to pay the payment, but I was never more than 30 days behind at one time. I always seemed to catch up. They told me I was the perfect candidate and it would help me tremendously if I applied. I agreed and began sending all the information required. After 4 months I was approved for a three month trial period. This three month trial went on for 10 months. The modification lowered the interest, therefore lowering my payement by $180 a month. This was affordable to me, I didnt struggle anymore with this payment, so I waited and waited to get a approval. Instead of an approval, I receive a letter from the mortgage company stating I no longer qualified and I owed the difference that was not paid in the past 10 months, and if not paid in 30 days foreclosure proceedings would begin. I had to retain a lawyer to get me out of a mess that Wells Fargo put me in. I have never been in such a financial mess in my life. The lawyer was able to postpone the foreclosure for a month. Three days after the foreclosure was postponed, I receive a package from Wells Fargo stating that my modification was approved. The offer that they are giving me is not acceptable. It is nothing close to what the trial modification was. They are putting the difference at the end of my principal balance, adding another 11yrs of paying, and the interest rate remains the same. How is this helping me. I want my original loan back. This is not helping me, this is helping them rob me. I will simply walk away from this home before I pay them a extra 11yrs.

  2. Joy says:

    The SAME exact thing happened to me!!!! Only I sent them the funds they required to get out of the modification program and bring my loan current and they said I was STILL behind one whole house payment. By MY calculations, I was caught up and $118.00 to the good! Wells Fargo Home Mortgage are the biggest scam artists I’ve ever seen. I was only behind one house payment also when they told me I was a perfect candidate for the program.. It’s the governments way of taking everyone’s houses… Yea, I said it!

  3. Pingback: Thankful for Loan Modifications? « Foreclosure Defense & Strategic Default | No More United States of Israel

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