Foreclosure Stories: Puppet on a string

Sep 20, 2012


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. This is the Penns' Tale.

After having successfully completed three “Trial Plan” loan modifications which ultimately led to dismissal of the foreclosure action against them, the Steins were never given the permanent loan modification agreement they were promised by their loan servicer, ending up in yet another foreclosure in July of 2011. As we see so often in this day and age of securitized home loans, where the servicer actually is paid more by the loan investors (the real loan owners), for servicing a loan in default as compared to one which is current, the Steins’ loan servicer kept dangling the carrot of a loan modification in front of them upon certain conditions, only to pull that carrot away after the Steins met those conditions. After all, for the unscrupulous servicer whose only regard is bottom line profit, this “puppet on a string” treatment of homeowners seeking mortgage relief makes perfect sense –stretch the loan modification application process out as long as possible and make all the money possible by doing so.

This dirty little secret of the securitized mortgage loan collection process, explains full well why the average person we see coming into our office with a foreclosure complaint has been working in good faith with the servicer attempting to get a loan modification for years. They have filled out innumerable financial packets; been rejected on the pretense that the packages were incomplete; told they had to begin the process all over again; been told they qualified for HAMP or other forms of mortgage relief, only to later be told there was a mistake, and they didn’t qualify; or, like the Steins, been put through numerous “trial plan” modifications, costing thousands of dollars, and subsequently denied any form of permanent relief. If you are a homeowner with a troubled mortgage, does this sound familiar? The scams used by mortgage servicers are endless, costing homeowners and loan investors billions of dollars a year.

If you consider the Steins’ treatment by their servicer as being that “puppet on a string”, I am very pleased to report that we were able to cut that string. Just consider the end result the Steins achieved: The interest rate on their mortgage was reduced from the initial 8.6% to less than half, 4.25%, with a resulting drop in the monthly payment from $1,350 to $850, a $500 savings per month. Over the life of the loan, this means the Steins will save almost $150,000. Unfortunately, the ending of the Steins’ mortgage nightmare is atypical of that realized by most Americans going through the process. Most often, those homeowners lose their homes through foreclosure after trying in vain for the illusive, good loan modification. The lesson in this story is not that you should not work with your servicer in attempting a modification, but simply to be mindful of the fact that the servicer is actually making more money as you are not making payments. In other words, the servicer profits by not working with you. Realizing this will hopefully help you to know if and when the time is right for you to cut the string and stop being a puppet.

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Next week: The story of Brett who reported his victimization at the hands of his fraudulent loan servicer in time for us to keep him out of foreclosure.

Copyright 2012 Daniel L. McGookey