Five Lies your Mortgage Company is Telling (or not telling) You
Most homeowners obviously experience increased stress and frustration with a mortgage delinquency, but far too much of the anxiety and stress is a direct result of trying to work with their lenders. Many homeowners tell the same story of a seemingly never-ending loop of document submissions, resubmissions, and re-resubmissions. The frustrations are often compounded by mixed messages from representatives. I have talked to far too many homeowners who have received a notice of foreclosure from an attorney within days of being assured by their lender that they were in review and everything is fine. Well, here are five lies mortgage companies are using to drive frustration…and profits:
You have to be delinquent to get help
You don’t have to be delinquent to qualify for the federal Making Home Affordable Program or any of its offshoots. You do, however, need to be able to demonstrate eminent default. This means you are going to fall behind if nothing changes. The problem is, if you are current, the servicer (the company you make your payments to) does not generate any late fees. If you are behind by at least your grace period (usually 15 to 20 days), then the 5% (or more) late fee goes directly into the servicer’s pocket. If you are unable to apply directly with your lender, visit the Making Home Affordable website to begin the modification application process.
We never received your documents
Well, we have apparently witnessed the downfall of all forms of message delivery. Homeowners cannot get their documents to the lender, despite multiple attempts to mail, fax, and even email requested information to the lender. This activity drags the process out, keeping homeowner’s delinquent…and keeping servicer’s in the money with more late fees. Send your documents in a way that is able to be tracked. Follow up with your lender two to three days later to ensure all documents have been received. Keep a phone log of who, when, and what was discussed.
There is nothing we can do about your fees
Loan servicers earn a tiny portion of the interest from the investor in exchange for collecting payments and some other customer service related tasks. Obviously, this can add up fast with portfolios sizes we see from our largest loan servicers. But the real money is in the fees. It is estimated that profits can double or even triple on a delinquent loan because of the 5% late fee associated with late payments. The servicer collects all fees for themselves, so they have NOBODY to answer to when it comes to fee waiver requests. The problem is, who wants to voluntarily pass on billions of dollars in revenue! Nobody. If you want to avoid these fees, then you must find a way to stay current on the mortgage. Fee disputes and waivers are seldom granted or decided in favor of the homeowner.
A short sale is in your best interest
Check your laws carefully for the lender’s option to pursue a deficiency balance. In other words, if the foreclosed house sells for less than is owed, is the homeowner responsible for the difference? Some states have laws that protect the homeowner from this type of lawsuit. If you do have this protection in your state, then a short sale really only makes sense if there are two mortgages or other circumstances that require avoiding foreclosure at all costs. The bottom line is: talk to someone BESIDES the lender or a realtor about your need to short sell in your state. Your local HUD certified housing counselor is the safest start.
We are starting you on a trial modification
This “trial modification” or “trial payment” is really just a partial forbearance. Here is how it works: the lender says you do not have to make your normal $1400 payment while they review you for a modification, but instead send us $1000 trial payment. Well, the other $400 gets added to a “side account”, which immediately comes due if you are denied or kicked out of the system for any reason. This helps to contribute to the onslaught of fees and confusion for homeowners as well. The bottom line is: pay your normal payment amount if you can. This will help to avoid problems in the event you are denied for a modification.
There is hope
Many servicers are setting up new approaches to document collection (often as a result of an out of court settlement). More and more savvy homeowners are protecting themselves by submitting to lenders in a way they can track and verify delivery, etc. If you find yourself struggling with your mortgage, the best thing you can do to protect yourself is to seek guidance from your local HUD certified housing counselor.
LSS Financial Counseling is accredited by the U.S. Department of Housing and Urban Development (HUD) to help families understand the home purchasing process, what steps to take to fix budgeting and credit problems and how to avoid predatory lending practices. Housing Counseling with LSS is free and confidential. Call us today at 888.577.2227 or visit our website to schedule an appointment.
And remember you should never have to pay someone to help you with a foreclosure or delinquency situation.
Author, Malcolm Johannessen is a HUD Certified Housing & Foreclosure Prevention Counselor with LSS Financial Counseling.