Working with an institutional lender to modify a home loan can be daunting task. You may get bounced from one representative to another as you try to navigate the processing maze. Sometimes you get inconsistent, conflicting answers from different people to questions about the application. Worst of all, some homeowners have had their homes sold at foreclosure by a lender while at the same time being assured by its representatives that the loan modification application is moving forward.
On January 27, a California appellate court reached a decision that is good news to those who receive mixed lender signals during the difficult, often confusing process of modifying their mortgages. In Aceves v. U.S. Bank ( 2011 DJDAR 1613), the Second Appellate District held that a homeowner’s reasonable reliance on lender assurances that it would renegotiate her loan was a sufficient legal basis to sue the lender when it foreclosed on the house despite repeated promises to work with her on a new loan. The decision is consistent with fundamental notions of fair play. In essence, it warns lenders against promising to cooperate with homeowners in negotiating the terms of a modified loan while simultaneously cutting them off at the knees by selling their homes at a foreclosure sale.
Here is the reality: In this fragile economy, lenders are inundated with homeowner requests to modify mortgages for distressed properties. Many are grossly understaffed for the task of reviewing the enormous volume of submitted applications. One hand of the entity helping with the modification may not be talking to the other hand or contract servicer responsible for the foreclosure process. You may receive inconsistent direction on your application depending on who you talk to and that person’s level of authority. At the extreme, your house may be sold at foreclosure despite assurances that your loan modification is being processed and prospect for its ultimate approval favorable.
Here are two key practice points that you should keep in mind when seeking a loan modification.
One, make every effort to deal with a supervisor or other person in a management capacity. Representatives who introduce themselves by their first names only are typically lower ranking staff people with little discretion or authority. Calls to the lender’s customer service department may be answered by a variety of adminitrative assistants or call screeners not personally involved in the processing or decision-making on the application. Try to bring your application to the attention of a person in a mid-management level who introduces himself or herself by their last name (i.e, better to talk to a Mr. or Ms. Smith than deal with a Bill or Mary who happens to answer your call). Meeting in person with a vice-president or other supervisor at an office of the lender is another good way of improving your chances that the modification will be timely, fairly reviewed. Building a personal rapport with a person in management may help cut through the organizational red tape as well as provide you with an invaluable resource who can pull internal levers to postpone a foreclosure sale.
Second, keep an accurate written record of all communications with the lender. Prepare notes memorializing the substance of all telephone calls and send confirming letters to make sure that you understand what documents are needed in order to move the modification to a successful conclusion. Print out and save all email correspondence with the lender regarding the modification. Keep copies of all written communication to and from the lender. In this way, you are maximizing your legal leverage under the Aceves case if your lender proceeds down the foreclosure path while giving you reasonable grounds for believing that it is seriously considering the approval of a modification.
Accessing the right people and keeping good records of all application-related communication will maximize your prospect for receiving timely and favorable attention to your mortgage modification application without suffering a home foreclosure.