Loan modifications are an essential tool in foreclosure defense. The goal is almost all of my cases is to get the homeowner a monthly mortgage payment they can afford. Unfortunately, a federal program aimed at helping homeowners has become a source of its own problems.
In 2009, in an effort to assist struggling homeowners, the federal government created the Home Affordable Modification Program (“HAMP”). The goal of HAMP is to offer a loan modification for qualifying borrowers with a monthly mortgage payment of 31% of the borrower’s income. Lenders and servicers are suppose to use a “waterfall” approach to create affordable monthly payments through 1) capitalization of the outstanding debt 2) interest rate reduction or 3) term extension.
Simple enough? Not quite. HAMP has fallen well below expectations and has helped far fewer homeowners than was expected. I’ll give you my reason for these dismal numbers: lenders and servicers aren’t playing by the HAMP guidelines. I’ve heard horror stories of borrowers who have spent years submitting applications and constantly being told their paperwork is missing or being denied for reasons that make not the slightest bit of sense.
It gets worse: in a ongoing class action lawsuit here in Boston, several Bank of America employees have given sworn testimony that their employer rewarded employees for denying HAMP modification applications.
With this in mind, anyone applying for a HAMP modification should keep detailed records on the application process and–most importantly–have proof that they submitted all of the paperwork.
If you’ve been denied a HAMP modification, seek an attorney immediately. While courts differ in their approaches to allowing HAMP lawsuits, Massachusetts has a strong consumer protection law that can often be used in these cases.
I’ve help many homeowners with HAMP denials. Contact me for a consultation.