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Cliff Perotti's Blog

By Cliff Perotti | Managing Broker in Corte Madera, CA

Loan Modification Pitfalls…Lender Fraud?

A recent borrower called me, pleading for assistance regarding her home loan modification. After seven months of being led on by her large bank (“the bank who shall not be named”), she received a notice from The Bank Who Shall Not Be Named, denying her loan modification. She had been told, on numerous occasions and multiple times, by the evil minions of The Bank Who Shall Not Be Named, that “everything looks good” and “everything is going well” and “you definitely qualify for a loan modification.”  Imagine her surprise when she received a Fedex envelope containing her denial letter and giving her two options:

· Short sale, or;

· Deed in Lieu of Foreclosure

At the time she began the loan modification process, back in September, she was current with her loan, but struggling in the aftermath of a divorce and an ex-husband who drained all of their mutual bank accounts. She told one of the lender’s minions that she would not be able to make the September payment, to which she was told “That’s fine, it will be taken care of in the loan modification.” So now, some seven months of non-payments leaves the borrower with a massive arrearages bill for thousands of dollars…and a lender who wants the borrower to “short sale” or give the lender a “Deed in Lieu of foreclosure.”

So, you should know that she was turned down for the loan modification because of two primary reasons:

1.    She made too much monthly income (a fact that was present in her initial 45 minute conversation with the bank),  and;

2.    The property was worth too much money (at least $200K more than the loan amount)

Yep, the real irony here is that the borrower has equity in the property. If she elects to sell the house, she would end up with a couple of hundred thousand dollars in sales proceeds….and the lender offers a “Deed in Lieu of Foreclosure” so they can profit this money themselves? Hmm…so let me get this straight…

The Bank Who Shall Not Be Named told a borrower that she would get her loan modification, and that no payments were necessary while she’s awaiting the process. Then, they discover that the house is worth a couple of hundred thousand more than their loan and they deny the loan mod, leaving the borrower with destroyed credit (now unable to refinance because of the credit score) and asking her to  Deed over the house to them? I’ve always thought…if it walks like a duck, sounds like a duck and looks like a duck…it’s a duck. Well, if is moves like fraud, sounds like fraud and looks like fraud….well, I leave you to draw your own conclusion.


By Sisto Campana,  Mon Oct 31 2011, 20:27

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