Sam came to see us in June of this Year with a mortgage issue which instantly appeared to have a simple fix. Despite that fact, his situation in terms of losing his home to foreclosure was still precarious because his Bank was not working with him on a mortgage modification. No doubt this was happening for the same reason it is happening to millions of Americans reaching out for mortgage relief across the Country, only to be turned away by their banks – the bank, (actually a loan servicer) makes more money when a loan goes into default. This is true because the bank/servicer is paid in percentage of the loan balance, rather than the amount collected in payments on the loan. Therefore, your bank is disincentiviced to work with you in helping you save your home, and incentivized to put you into default, and eventually into foreclosure.
This was the position Sam was in in June of this year. He found himself in that position despite the fact that, with a total gross monthly income of $1,600 in Social Security benefits, and an $820 per month mortgage payment, he clearly qualified for HAMP mortgage relief. HAMP dictates that one’s mortgage expense (principal, interest, taxes and insurance or PITI) should be no more than 31% of the gross household income. In Sam’s case, that means that his mortgage payment should not have been more than $496 per month, rather than the $820 per month it was.
Now we come back to why we say Sam’s was a simple case. Math and federal law tell us that Sam’s payments must be reduced by 40%! Sam’s Bank continued to ignore our demands for HAMP relief and filed a foreclosure case against him about two months ago. However, at a court hearing within the last week, his Bank pretty much admitted the error of its ways and acknowledged its legal responsibility. The end result will be over $300 in monthly mortgage payment savings for Sam over the next 20 years. And all of this is just a case of the law and of simple math. Is your mortgage story as simple as Sam’s?
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Kate Eyster and Lauren McGookey contributed to this article.