Saturday, October 26, 2013

Rejection of Loan Modification and Foreclosure due to Incorrect Calculation of Income by Bank

Question: When I was attempting to get a loan modification, the bank incorrectly counted my income, in order to correct their mistake, they requested that I reject the current offer and reapply. I followed their instructions. I reapplied and for 6 months they kept on saying that they were reviewing my new loan modification application and I would be getting an offer or denial in the mail. I was following up with them every month if not more often than that. They kept on saying it was under review each time I called and that I should be patient and wait for the response in the mail. Within a week or two of these follow up calls, I received a foreclosure notice on my door. When I asked the bank what was going on, they "escalated" my account to be reviewed based on their erroneous information to some department that I could never talk to. Nevertheless, my home was foreclosed on with an option to do a deed-in-lieu of foreclosure, short sale, etc. I believe this has adversely affected my credit score and job opportunities as almost every employer looks at my credit and sees this negative information on my background. What chances do I have in seeking damages for this unethical practice? As a side note, this was not a subprime loan, it was a full doc.

Response: Unfortunately, seeking a loan modification is a not a waiver of foreclosure. When you stop making payments, the bank can indeed start a foreclosure action and proceed with foreclosure unless your file is specifically placed on loss mitigation hold (which would stay foreclosure action). It is surprising though that the bank was able to foreclose so quickly because foreclosures these days last substantially longer than in the past. Also, banks are usually more inclined to try to settle the matter with you via loan modification rather than foreclosing so it's a bit surprising that they foreclosed. Also, if you are told after 6 months that the file is still in review, something is wrong. The banks are allowed 30 days to complete review once a complete package is received. You have to be very aggressive in following up at least once a week because documents become stale after 60-90 days and then you can't be reviewed with old documents. I doubt that you have grounds for a lawsuit against this bank.

In the legal blog, Attorney Svetlana Kaplun addresses typical questions our firm has received from our clients, or come across from homeowners related to foreclosure, foreclosure defense, loan modification and bankruptcy topics.

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