It used to be in the old days (just a little over ten years ago) before loan securitization (bundling loans together in a pool for the purpose of selling stock certificates in the pool at a huge mark-up over the face value of those loans) was legalized, banks actually were anxious to receive any payment they could from a borrower even if it were a fraction of the amount owed. With the advent of loan securitization however, just the opposite is true. Banks seem to be running away from the homeowner who is trying to make a payment any less than the full amount claimed to be owed, which is often an inflated figure. Brett’s story is a good example of this phenomenon.
After falling six or seven months behind on his mortgage payments, on August 27 of this year, Brett was contacted by his loan servicer about his past due balance. At that time he was told that the sum of $9,656.89 would bring his loan current. That amount included interest and late charges. Brett was told that he had to either wire the funds or send a certified check immediately if he wanted to reinstate the loan. Fortunately, Brett had the money available and he did exactly as he was instructed by sending a certified check via overnight mail.
Within days Brett called the servicer to confirm that everything was okay, and that his loan was reinstated as promised. Contrary to its’ promise, however, the servicer told Brett that the amount he sent was insufficient and that the check was going to be returned. In addition, he was told the amount he needed to send was almost $5,000 more than the amount quoted only days earlier. No explanation for the large discrepancy was given. Upon hearing this, Brett made an appointment to see us. Without doubt, in the eyes of the law the servicer’s specific direction to Brett to send in over $9,600, combined with its promise to reinstate his loan upon him doing so, constituted an offer which became a binding contractual obligation when Brett did as instructed. We will use these simple facts to put the servicer’s “feet to the fire” and hold it to its commitment.
However, this case once again demonstrates full well a sad fact of everyday life in the world of loan securitization: The banks in charge of your loan profit through foreclosure.
Because they have no ownership interest whatsoever in your loan, and because they have purchased financial products such as mortgage insurance or credit derivatives which will pay off if foreclosure results, they have nothing to lose and everything to gain by foreclosing, no matter how upside down on your mortgage you may be. To be aware of this fact is the first step required if you, as a homeowner with a troubled mortgage, are going to be successful in fending off foreclosure.
Note from the author: If you have questions or comments regarding this or any Foreclosure Story article, please visit www.mcgookeylaw.com.
This is a weekly column by Sandusky attorney Dan McGookey, devoted to telling true stories of homeowners who have been victimized by a lending system that makes it profitable to foreclose. The names used have been changed for privacy purposes.
Next week: The story of Daniel, whose loan servicer, PNB, refuses to work with him in modifying his FHA-insured loan, even though he has gained employment, resulting in an ability to make payments.
Copyright 2012 Daniel L. McGookey