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Loan modifications of home loan mortgages are in the news these days — and lots of these home loan modification stories are scary horror stories that are filled with all kinds of villains taking advantage of good people for money.  It’s greed, in several different forms.  Loan modifications should be straight-forward and pretty easy to predict: here is the information the bank needs to know, here’s the documentation that supports the bank’s requirements, here are the options that the bank can offer, here is what the borrower thinks is his or her best alternative.  Loan modification documents finalized, everyone signs: loan is modified.

But that’s not what is happening in Florida or the rest of the country in many, many situations.  Modifications are not happening.  The Florida Supreme Court tried to push for loan modifications as a way to solve the problem of a court system bottle-necked with foreclosure lawsuits: it failed because the banks didn’t do much modifications.

In the news this week, we can all read stories of failed modifications that are based upon bad acts.  Consider:

1.  Three Modification Denials and Foreclosure During the Third Modification Round

There’s the Chuns in Minnesota, who are suing IndyBank after some curious modification dancing by the bankers. Seems bad times and an ARM combined to put the Chuns (in their eighties, by the way) close to foreclosure.  IndyMac, their lender, offered a loan modification after the bank sent out its foreclosure notice – a HAMP modification.  The Chuns applied, and got rejected for incomplete documentation.

So the Chuns resubmitted their modification request and got rejected a second time.  Each time, the IndyMac bankers reviewed what the Chuns were submitting and told them things were great.   The Chuns tried to sell the home with a realtor ($1.4 million listing) and salvage around $265,000 in equity.   IndyMac invited another modification round, and they submitted another set of modification application documents after taking the house back off the market.

While this 3d set of documents was being “processed,” the foreclosure sale by IndyMac went through.  What did the bank pay for the house at the auction?  $685,000.  The Chuns have sued, and the judge has blocked the bank from evicting them from their home until their claims of bank fraud are heard by a court.

2.  Florida Con Man Pleads Guilty in Fraud Scheme of Home Loan Modification Scams

Last week, Vernell Burris, Jr. entered a plea of guilty to charges that he had conned people who were trying to get help in home loan modifications. Seems that Burris and his cronies ran a company they named “Home Owners Protection Economics Inc.”  (HOPE, get it?) for over two years, and the entire set up was a fraud scheme to get stressed out and scared mortgage home owners to send them cash as they tried to save their homes with a home loan modification. Burris and his fellow grifters told their employees at HOPE to tell HOPE customers all sorts of lies, just to get home owners trying to qualify for a federal home loan modification to send in a fee to HOPE.  The fees ranged from $400-$900 and (of course) had to be paid up-front before HOPE would “do” anything toward helping get the loan modification accomplished.   Before they got shut down, Burris and his gang of thieves took in over $3 million from unsuspecting home owners trying to save their homes through loan modifications.

3.  Goldman Sachs Caught Telling Its People to Ditch All Home Loan Modification Applications

Goldman Sachs has been around for awhile, it’s not some fly by night company set up by scammers, right?  After all, it’s got offices all over the world and it’s known as a big securities firm that has been in business for years (since 1869, in fact).  However, Goldman Sachs has been monkeying around with home loan modifications, too, it seems. According to news reports, Goldman Sachs bought a little Texas company named  Litton Loan Servicing back in 2007, which held a bunch of  “non-performing” sub-prime mortgage home loans that Litton was trying to salvage with loan modifications (among other things).  Why? The Financial Times expose reported that Goldman interest in the company wasn’t the home owners, but the data that Litton collected in its files, which Goldman Sachs could use to make better investment decisions in the mortgage housing investment market.  Then, the housing crisis hit and all those investments went belly up. What did Goldman do?  According to news reports (quoting Litton people there at the time), Goldman ordered NO loan modifications to be okayed and to foreclose, foreclose, foreclose.  The only thing that stopped them here was the federal government issuing a stop order (the moratorium).

What about Home Affordable Mortgage Program (“HAMP”)?  Litton agreed to HAMP, but even though Litton was deluged with modification applications from home owners wanting to negotiate a loan modification, they were told to DENY every single one of them.  Didn’t matter what the situation was; didn’t matter what the documents revealed; didn’t matter what documents were in the file or not.

The Financial Times calls this a “denial sweep strategy”  and today, after a federal investigation, Litton has been sold to Ocwen Financial and Goldman entered into a consent agreement (hand slap) with the federal government.  Litton, as a company, is no more.

Larry Tolchinsky’s Tip:

These news stories aren’t a fluke and they are far from the only scandalous acts by banks to avoid home loan modifications.  If you, as a Florida home owner, are frustrated and stressed in your attempts to negotiate a home loan modification, you are part of a very, very big club.

Sure, not all the banks are doing illegal things like blatantly taking your applications and then denying them without any sort of review process.  There are lots of Florida banks, however, that are getting close to the edge of that envelope, though: it’s very common for Florida loan modification lawyers and Florida real estate attorneys to hear and swap stories of:

  • magically disappearing loan modification paperwork;
  • home owners not being hung up on, but having their phone calls put on hold for long periods of time;
  • borrowers having their phone calls routed from person to person to person at the bank;
  • mortgage loan modification applications being carefully prepared and present by the home owner, only to have no response at all after submission for a very, very long time;
  • home owners discovering that what the bank’s foreclosure department knows and what the modification people know aren’t the same thing (one of the problems of the Chuns’ case, see above).

Florida mortgage modification lawyers work with these lenders and bank representatives all the time.  It’s a sad and scary time in Florida real estate right now, there is a lot of evildoing going on these days.  There’s also a lot of foot-dragging due in no small part to lenders feeling overwhelmed.

Having an experienced Florida lawyer helping with a loan modification can make a big difference now, maybe more than ever before, since Florida real estate attorneys not only understand the legal issues but we can also roll up our sleeves and help in the actual modification process.

Here at Hallandale Law, for example, for a reasonable rate (designed to resolve client fears of exorbitant lawyer fees)  our team works with our clients to submit loan modification applications to the banker (or re-submit as the case may be).  Why?  For one thing, new laws state that foreclosure isn’t allowed to go forward down at the courthouse if there is a pending loan modification request or other foreclosure alternative request.

For another, we deal with reputable lenders all the time — and we’ve crossed paths with a scammer or two, as well.  We think this kind of experience and street smarts is a good thing for our clients to have on their side in any mortgage home loan modification.

Do you have questions or comments? Then please feel free to Chat with Larry in the comments below, at, or (954) 458-8655.  If you have a specific situation, please call or email Larry because he can’t answer specific fact questions in general comments.  He’s happy to take your call.

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