04/12/09: The Unreachable Lender

Housing Counsel

By Benny L. Kass

Q: I am in financial trouble, and have been trying to reach my lender. I have made several calls in the past two weeks, with no success. Sometimes, I have been disconnected while talking to a bank representative. When I finally reach a live person, it is never the same one I talked with earlier. Once, I spoke with someone in New Delhi, and the next day my call was directed to Phoenix, Arizona. I have to go through the same drill each time: what’s my loan number, my name, the last four digits of my social security number. Then after getting “cleared” to discuss my situation, I am told that a supervisor will review my case and someone will get back to me. But in the meantime, I am advised not to make any more payments.

Thus far, no one has called me back. In the meantime, I am now two months behind and concerned that I will soon receive a foreclosure notice. Please help.

A: This is a real problem which is getting worse every day. Lenders are busy dealing with foreclosures, short sales and work-outs. Additionally, now that mortgage interest rates are so low, they are deluged with requests for refinancing. As a result, it does not appear that they have sufficient staff to adequately handle concerns such as you have described.

As a result of new government initiatives, you have alternatives to consider. Programs such as “Making Home Affordable” are now available to assist you. If you are current on your mortgage, but are unable to take advantage of the very low mortgage rates currently available because your home has decreased in value – and if your loan is owned (or securitized) by Fannie Mae or Freddie Mac, you may be able to refinance your loan.

To determine if your loan is covered under this program, you should try to contact your current mortgage lender or the company that services your loan. If you cannot get through to a human being there, both Fannie and Freddie have established toll free phone numbers and web sites to assist you.

For Fannie Mae: 1 800-7FANNIIE, or www. Fanniemae com/loan lookup.

For Freddie Mac: 1 800-FREDDIE, or www.Freddiemac/my mortgage.

To be eligible for such refinance loans, your current loan cannot exceed 105% of the current market value of your property. For example: if your property is worth $200,000 but you owe $210,000 or less, you may qualify.

And even if you are one or two months behind, you still should contact your mortgage company (or the company to whom you pay your mortgage). Many servicers have agreed to postpone foreclosure sales on all mortgages that meet the qualifications for a Home Affordable Modification.

The Privacy Act prohibits lenders from talking to anyone about a specific mortgage loan unless the lender is satisfied that the caller is actually the borrower. If you decide to use an attorney or a financial advisor to intervene on your behalf, you have to provide a specific letter of authorization to the lender.

This is time consuming. Lenders tell me that you cannot email them the information, but have to fax everything. But from my experience, it can take up to 72 hours (or more) before your fax gets into their system. To add insult to injury, your fax may go to Dallas, Texas, but when you call to speak to a loan modification person, he or she may be in Phoenix, St. Louis or even in New Delhi.

Despite recent government programs, there does not appear to be any uniform standards as to what is required to assist homeowners in trouble. This is especially true when requesting a short sale. Let’s assume your house has lost value in the past year and is now appraised at $350,000. You owe the lender $400,000. You retain a real estate broker who finds a potential buyer willing to pay $325,000 for the property. You – or your broker – submit the sales contract to the lender, asking them to approve this sale. You understand that your lender will be losing $75,000 in the deal, and your broker understands that he/she may not get a full commission if the lender approves.

One would think that the lender would prefer to have the short sale take place rather than foreclose on the property, but apparently lenders don’t always think that way. I have been involved in – and heard of other situations – where the bank just sits on the contract for months at a time, before making a decision. In the meantime, the potential buyer decides to walk away, because of the uncertainty. The buyer wants to take advantage of a good deal, but does not want to have to wait for months at a time.

In my opinion, perhaps the most insidious practice is when lenders tell their borrowers “don’t make any more payments until you hear from us about your request to restructure your loan”.

First, this statement is rarely put in writing by the lender, and often this advice is not even put in file they keep on their borrower. As a result, I know of cases where borrowers have relied on this verbal advice, only to have their credit ruined. Some have even been foreclosed upon because they were 3-4 months delinquent on the monthly mortgage payments.

Here are some suggestions if you find yourself in need to modify or restructure your existing loan:

– most commercial lenders have information on their website giving you guidance on how to communicate with the bank. They all have certain basic requirements, one of which is to fill out a comprehensive form, which explains your situation, and return it to the lender. You will be asked to provide a lot of financial information, copies of bank statements, your job information and proof of salary, and in some cases your most current income tax return. This is usually a prerequisite before any lender will even start talking with you.

– most lenders now have automated telephone answering systems. If you can get through to the lender, you first have to answer questions to a talking machine. Just keep hitting “0” on your phone; in less than a minute, you should be referred to a human being.

– get the name of the person you are talking to, as well as where they are located.

– as painful as it may be, especially if you have already done this several times, cooperate and provide your information so the lender can comply with the Privacy Act requirements.

– confirm that the lender has received your information. This should be available on the lender’s computerized file.

-understand that in most cases, the person you are talking to does not have authority to make any arrangements until approved by a supervisor. If you are told not to make any more mortgage payments until further notice, ask that this be put in writing. If this request is denied, ask to immediately speak with a supervisor, and get his or her name. Once you get off the phone, send a fax to the lender memorializing what you were just told.

– if you do not hear from anyone within one week, call back, and then keep calling at least every other day. You want to get their attention, and once again, try to talk with a supervisor who should have authority to assist you.

Finally, you should consider contacting a HUD-approved housing counselor by calling 1-888-995-HOPE (4673).

You can get a lot more information about these programs at www.makinghomeaffordable.gov.