Well it seems that what we all suspected was in fact true! According to a former Bank of America employee, Loss Mitigation Specialists were told to delay the Home Affordable Modification Process (aka HAMP) and were even given bonuses for foreclosure initiations!
Ex- Loss Mitigation Specialist Simon Gordon went on record recently stating that employees of Bank of America “were told to lie to customers” regarding the status of their modification requests. Going one step further Gordon stated that “Site leaders regularly told us that the more we delayed the HAMP [loan] modification process, the more fees Bank of America would collect”.
To better understand what Gordon is referring to when he says “collect”, it is important to remember to that the majority of loans with any of the major banks (Bank of America, Chase, Citi, Wells Fargo) are only being serviced by said banks. While one’s statements may say Bank of America, and one’s payments may be made to Bank of America, the reality is that the loan is generally owned by an investor (whether a GSE like Fannie Mae, or a private investor, etc.). Servicers such as Bank of America are paid to be the middle man between the consumer and the investor, and they are paid whether a loan is performing or non-performing.
Having previously ran a firm responsible for nearly 15,000 loan modifications, and now running one of the largest short sale specialist firms, I regretfully get to say “we told you so”, as we saw this coming a long time ago.
The fact that servicers are paid whether a loan is performing or non-performing represents a major conflict of interest on both sides of this equation, here are the two most obvious:
1. Homeowners cannot have confidence that servicers are doing everything possible to assist them, when servicers are making money simply by keeping them in purgatory.
2. Investors cannot have confidence that servicers are foreclosing fast enough, when they are being paid for every day that the loan is still open.
A perfect example of this situation is an employee who knows that his department is being phased out, so he works as slowly as possible, and creates as many hurdles as possible, so that he can receive his paycheck for as many more weeks as possible!
Thankfully, the truth about what is happening inside the walls of these big banks is finally coming to light.
In addition to Gordon, others are coming forward to corroborate his story. Six former employees described, in sworn testimony, the systematic efforts to undermine the modification program by routinely denying loan modifications to applicants who were in fact qualified. Furthermore the six, went on to describe that they were encouraged to withhold reviews of completed applications, were told to steer applicants to more expensive “in-house” modification options (instead of the government based HAMP), and were even bonus-ed based on the number of new foreclosures they initiated!
Another Ex-Bank of America employee, Theresa Terrelonge, went on record saying “Based on what I observed, Bank of America was trying to prevent as many homeowners as possible from obtaining permanent HAMP loan modifications while leading the public and the government to believe that it was making efforts to comply with HAMP,” and that “It was well known among managers and many employees that the overriding goal was to extend as few HAMP loan modifications to homeowners as possible.”
While Bank of America staunchly denies the allegations, anyone who has pursued a modification (or has assisted with obtaining a modification) is well aware of the tricks that are employed by servicers in an effort to prolong the process. Whether it is losing faxes, requesting extraordinary documents and giving an impossible time frame, or not answering/returning phone calls, the end result is a runaround that takes months (sometimes years) and provides no relief to the homeowner, nor to the investor behind the note.
For those that doubt servicers were deliberately encouraging the delaying of modifications, answer this one question for me: Why does it take Bank of America months to arrive at a denial for a modification (based on insufficient income) when I can take the gross income of the borrower, multiply it by 31% to determine the max affordable housing payment, and then take the outstanding loan balance and figure out the fully amortized PITI payment at 2% interest (lowest possible rate), compare the two numbers and realize that the homeowner cannot afford this property in 5 minutes???
Stay tuned for more updates as they come out, and feel free to check out our extensive list of short sale success cases here.