Bank Frustrates Borrower’s Attempts to Find a Solution

Lender acts like keystone cops but it’s not funny. Is it intentional or are they simply inept?

Palm Coast, FL – March 29, 2010 – Borrowers who are in trouble with upside down mortgages often find their lenders unwilling or unable to work out a solution. In one case involving a Palm Coast resident the lender’s actions were like a keystone cops segment except it wasn’t at all funny.
Kate (not her real name) related her story to me. She told of how she got off on the wrong foot from the very beginning. When she found the house of her dreams, she contacted a friend in the mortgage business to get a loan. A check of Kate’s credit score revealed a major problem; Kate was "Deceased." Not wanting to loan money to a dead person, banks naturally declined her application. [Apparently Kate’s reputation predeceased her.]
Kate has no idea how the error occurred, but it couldn’t be fixed in time for her to meet the financing commitment timeline of her purchase contract. Luckily, a contact with Country Wide (real name) paid off. She got her mortgage after providing documents unlikely associated with a deceased person; W-2s, paid utility bills, tax returns, etc, but the interest rate was going to be 12% with monthly payments equaling $2,244. [Lending to dead people is naturally riskier.] Kate planned to get through the closing, then straighten out the "Deceased" issue and refinance at a reasonable rate.
Part two of Kate’s saga began after she fixed the credit report and refinanced with SunTrust (real name) at a lower rate. Her monthly payment dropped to $1,746. Time passes. Kate is a real estate practitioner. Like her brethren in the real estate business, she fell upon difficult times when the housing market crashed. She missed a payment or two, but always caught up quickly. Without question, SunTrust accepted each delinquent payment.
In fact, the bank sent Kate (via FedEx) an unsolicited offer to modify her loan. The modification would reduce monthly payments from $1,746 to$1,285. She was directed to fill out the application and send it in. Before Kate could do that, SunTrust called to tell her they had made some errors in the loan modification application. They would send her a new application. When it arrived, the second application proved to be identical to the first.
Enter the keystone cops. Kate completed the application which was approved. Her first post-modification statement arrived. Strangely, the amount due was only $2.74 less than her previous payment amount. It also revealed $7,000 had been added to the principal and $2,900 had disappeared from her escrow account.
After a time, Kate began to slip behind in her payments. A cycle began of SunTrust calling about missed payments and Kate calling the bank about a real loan modification. She did not want to lose her house. Each time the bank called, Caller ID revealed only the bank name, no number. The (800) number Kate called seemed to lead to a new person each time. When she asked to speak to the same person again, Kate was told, "no one by that name works at this location." Apparently the (800) number switches calls to one of several call centers.
  1. Each time, Kate had to explain her story all over again.
  2. Each time, the representative was sympathetic and promised to look into the situation and call back.
  3. Each time Kate was reassured that the bank did not want her house. She was not at risk of foreclosure.
  4. Each time they failed to call back.
  5. Repeat step one.
The final blow came the day Kate was reassured once more that she did not have to worry. She definitely was not in foreclosure. The representative would look into her case, promising to help and promising to call back. That afternoon, Kate answered a knock on her door. A process server had an envelope for her. It was a notice of foreclosure. Kate is still communicating with SunTrust, but now it’s through her attorney.
Kate’s story is not unique nor is SunTrust alone among lenders in its actions. The flood of short sales and foreclosures caught the system unprepared. Borrowers caught in the downward spiral and under intense pressure to "make the situation go away," are confused by alternatives, all of which seem bad.
All choices have consequences. For instance, stopping payments may succeed in getting your lender’s attention. It also triggers the default clause in your note which resets the interest rate to a level as high as 18%. At 18%, the unpaid balance doubles in only five years.
Lenders may release the lien associated with the mortgage, allowing a short sale to go through, but that does not let the borrower off the hook. A release of the lean doesn’t release the note obligation. The lender can wait up to five years to pursue a default judgment.
Lenders are increasingly selling their troubled loans to debt collection companies for pennies on the dollar. The debt collectors will go after the defaulted amount. Trust that they will be more aggressive than your lender was.
Use an attorney. Use one that specializes in real estate related issues. Check references. Explore your options; short sale, foreclosure, bankruptcy, loan modification, refinance, etc. to find the one most appropriate for you. Make sure a payment the lender receives from mortgage insurance is offset against your deficiency. The best solution is not necessarily the one that offers the most immediate relief but the one that will be most beneficial in the long term.
If you have a story you would like to share, Toby wants to hear from you. (Contact Toby or call me at 386-931-7124).

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