I can certainly understand your frustration with this situation. Please realize that the parties employed by the bank are most likely frustrated as well, I know this from experience. It's a challenge for the "process" of things to go as smoothly as anticipated. In large companies, there is a high turnover rate. Many employees are in and out in a matter of months. When a loan is in default, it goes through several departments; typically, it's Loss Mitigation first. If the bank and homeowner cannot work something out, it's passed to another department to see if they have a solution. I guess what I'm trying to say is the person who initially denied or wouldn't work with the homeowner may have quit in the middle of the file review or passed the buck, so when another person reviewed the file, they may have found a solution.
Unbeknownst to the new loss mitigation rep, as they were not informed by the homeowner of the short sale in process, they probably began the modification process
I know, I know, you would think all notes would be in the system or red flag would appear or banks would have a flashing neon light for the loans that are in process for something but to be honest, many departments don't even work in the same systems, let alone are able to read each other's notes.
Please contact a real estate attorney for assistance.
Envoy Mortgage, Ltd.
NMLS# 947738 / AZ# 0921717
Since it's a legal question, I'd advise you to ask an attorney, but............my personal opinion is no, you can't "force the contract"............if this is a short sale, which I assume it is, the bank has final say on everything.......it's never "over till it's over" when dealing with a short sale.
It's unfortunate the bank didn't accept the loan modification before putting everyone through this!
The only good news is (although not so much for you) is that a homeowner gets to keep their home.