Housing News

This Mortgage Program Has Gotten It All Wrong

Class action law suit filed against BofA and another mortgage servicer

If this is how the result of your mortgage modification will be, better think about approaching Bank of America and Wells Fargo. The two mortgage servicers are facing cases of against its competency to modify the existing loans of its borrowers. The Billings Gazette reports in the last day of February, “The two cases, filed in Massachusetts, seek class action status… The claims are simple, the two filings say: ‘When a large financial institution promises to modify an eligible loan to prevent foreclosure, homeowners who live up to their end of the bargain expect that promise to be kept.'”

The report adds, “The Home Affordable Modification Program is the main federal plan for reducing mortgage payments, part of a $75 billion plan to stem the national foreclosure crisis. The program calls for a three-month trial period, intended to give time for the homeowner to demonstrate an ability to keep up with the lower payments. However, there are growing reports of homeowners in trial plans ultimately being rejected for modifications despite making their trial payments or even being foreclosed on during the process. The modification process has generated so many complaints that regulators and lawmakers are pressuring lenders to improve.”

So here are lessons for the current administration based on this issue.

First, if it’s broke, better fix it without any flaws. The government must not take trial-and-error risks at this moment. There are far too many homeowners caught in financial distress. It’s no wonder why they can file such lawsuits. They’ve had too much stress.

Second, choose banks that will carry out the program wisely. Seriously, do you expect BofA to administer a trouble-free mortgage modification program? This isn’t the first time that the bank has been slapped with a civil case. In early February, Ohio homeowners complained the bank fell short of its promise.

ABC News also reports last December, “A Bank of America executive said only about 15,000 homeowners, or a quarter of the 65,000 borrowers in trial modifications that are set to expire by year-end have sent back their paperwork, according to prepared testimony for a Tuesday hearing on Capitol Hill. Jack Schakett, Bank of America’s credit loss mitigation strategies executive, cited ‘ineffective communications with customers, shortcomings in document maintenance, misunderstandings about program requirements, and the inability to comply by some borrowers.'”

Finally, there should be some serious penalties if the government’s program isn’t managed effectively by any of the lending institutions. This will motivate our banks to improve their operations.

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