Monday, August 15, 2011

Bank of America - Loan Modification - Process Hell

Disclaimer:  We incurred other debts while buying the home, however, we're on track to have those paid off within a couple years.

We were current on our mortgages until Bank of America told us they couldn't discuss a modification until we were behind. I do not believe in making covenants, promises, or contracts with people and then reneging on them... however my loan was made with Countrywide Financial, no one discussed Bank of America's purchase of my mortgage. No one discussed anything about our mortgage during any of this time, unless we demanded to know it. Feel free to email me to debate the ethics of this situation, however, I believe this loan was made in bad faith, by corrupt individuals intent on collectively scamming the American public. Bank of America, in fact, was bailed out by the American taxpayer for billions of dollars... this is what the American taxpayer can expect in return:


In 2007 my wife and I bought what was going to be our dream home. A modest little 2 bed, 2 bath house in the Central Valley of California, not far from her aging parents.
At the time we bought the home the market had dropped a bit, and I felt it was the right time to buy.

We paid roughly $440,000 for the home, everything included, in May, 2007.

It didn't take long for our investment to vanish. By early 2009 our home was estimated at $140,000.  Our neighborhood had turned over twice, with all our neighbors having been replaced by new neighbors. We believed that we were doing the "right thing" by continuing to pay mortgage, but felt we should investigate loan modification options.

When we first called Bank of America (who bought the loan from the defunct Countrywide), they told us that we were current on our loan and that they could not even start the loan modification process until we were behind on the loan. That's right, as good folks, doing what was right, scraping by to pay the mortgage... they couldn't help us or even talk to us about it.

We stopped paying our first mortgage (we have a smaller, second mortgage), and began the loan mod process with Bank of America. Our first round with them was difficult, sending them documents several times because "they didn't get it".

Our neighbors suggested we hire a company they knew of to help, they claimed this company saved them a lot of money.  I was against it, but my wife begged, so we paid a company $2500 to work with Bank of America to help through the process of the loan mod. This company promised to "get the loan modified or your money back".  Well, a year later, that company and the law firm they were working with have vanished.  They did do a lot of footwork, so I'm not totally unhappy about it, but we're out $2500.

Meanwhile, Bank of America robo-called us, daily, asking for money.  The first few times I called back I was connected with a teen-ager who asked me to pay my mortgage. He asked "how much can you pay today", and I replied, "Well if I become current on my loan, the loan modification process stops, right?"  About that time, they'd look up our details (why in the heck they didn't have them already available, who knows?) and tell us that we were under review and let us go, only to call us again, sometimes twice a day, the following day.

The American Dream - or not... our home, 2007
In the middle of 2010 we were denied our first loan modification as we were not "making enough money." My wife and I received substantial raises that year and our loan went back under review. We were then denied a modification, they told us, because we "made too much money."

We went again under review, providing them the same paperwork, over and over and over either because they needed updates or because they lost it. (You'd think a company that makes billions of dollars would be more careful with customer's paper work, but alas.)

Finally, in August of 2011 we were told that we'd exhausted our loan modification possibilities.  President Obama's "making home affordable" plan wasn't able to make home affordable, and Bank of America seemed intent on losing money on a short sale or foreclosure.

At no time during this process did anyone from Bank of American explain, discuss, negotiate, or even mention what was going on apart from vague references to the modification. We often received request for documentation after it's supposed due date, and, as I stated, had to re-fax items they claimed to have lost.

We're considering our options, hoping to hear from Bank of America as to how to get the short sale process going, so we can move on with the next chapter of our life. We were told in a letter from Bank of America that even coming current now with the loan will not save the home!

Consider this last tidbit... if not for the Home Foreclosure and Debt Consolidation Act of 2008 we would have to pay taxes on the loss the lender took on the short sale or foreclosure auction of the home.  That means in all likelihood we'd have to pay income taxes on the forgiven debt, of  about $300,000. In fact, if the house is not foreclosed or sold by 12/31/2012, we will have to pay taxes on the forgiven debt...  think about that.

The Happy Homeowners - 2007

UPDATE 8/16/2011
I spoke with Bank of America today, after tweeting my displeasure, they contacted me directly.

Here's what's up. Since my wife and I together make enough money to scrape by and pay our mortgage as it stands,
Bank of America won't modify the loan.

That is, even though our home lost 69% of it's value in 2 years,
Bank of America's goal with loan modification is to make MONTHLY PAYMENTS affordable for the home owner, NOT to deal with the fact that the home's value is gone.

I understand this viewpoint, if it were the other way around (say, it GAINED 60% of it's value), no one would be complaining. That said, the fact that my neighbors bought the SAME EXACT HOUSE for 1/3 the cost, less than 2 years after we bought ours, is no concern of theirs.

We still have to talk to their short sale department to see if a short sale with eliminate both first and second mortgages...

UPDATE 8/17/2011
I spoke with Denise Hayes in Bank of America's Short Sale department and she explained the process to me:
  1. Get a real estate agent
  2. List property
  3. Get offer for property
  4. Agent sends offer to Bank of America
  5. Loan approval process for buyers 
  6. Walk away...
Denise did not mention if we had to qualify or anything of that matter. She said there was no reason would not qualify (this remains to be seen.) She said the basis of the sale was on the offers, not on our qualifications.

Short Sale concerns:

A few weeks (in December) after our agent placed the sign on our lawn, a sign appeared on our door stating the house was going under "trustee's sale" (read: auction).  They STAPLED this to our door.  I contacted our agent who didn't seem concerned, she told us to give her the papers. I tweeted again to @BofA_Help, they got right back to me and explained that even though we were approved for the short sale process, BofA still moves forward with their foreclosure process.(!!!)  Even though THEY told us to short sale, they may still foreclose and auction the house. They said, however, that this was normal and that our agent needed to request an extension so that the auction would be postponed.

Since then, we've had two buyers attempt to purchase our home in short sale. The first fell through when Bank of America denied the sale. The second fell through just last week when the buyers were unable to get financing (what a difference from 2008.)

We were nearly ready to pack and move when we found out that last bit of information. So we're back to showing the house and hoping someone gets financing and BofA approves the sale.

Keep in mind, our home went from $440,000 (our purchase price) to $140,000 (the current appraised value of the home.)  We make enough money to own the home at $140,000 easily, but BofA is not interested in helping us keep the home.   With that in mind feast your eyes upon this image:

These are a few of the 200+ homes in our immediate area in some part of the foreclosure process. The green dots are foreclosures where the people are still in the homes, the blue are homes in the auction process (including ours) and the red dots are bank-owned homes.

If this is surprising you should see the map of 2000+ homes in Stockton, California in foreclosure.

Remember, Bank of America (and other banks) used taxpayer money to buy our home mortgage and others from the defunct Countrywide for pennies on the dollar...

We've had three potential buyers for the home since the last update. Two fell through and then a few weeks ago we heard we had a buyer was paying with cash. Bank of America re-appraised the home (probably hoping to scrape a few thousand more out of the buyer), but approved the purchase. The only potential snag came from our Home Owners Association (Landmark Limited) who threatened to scuttle the purchase unless we paid back-dues (honestly owed for two months) and then pay some "transfer fee" of over $250! I went ballistic... but paid it.

We're moving to a nice place on the other side of town, renting for less than 1/2 what our mortgage was.

Our purchase price: $440,000
Short sold for: $149,000
Total loss: $291,000

That's 34% of original price, just 4 years ago. Now keep in mind, if not for the "The Mortgage Forgiveness Debt Relief Act" we would owe INCOME TAXES on the loss (as it is "forgiven debt"). That's about $108,000 in taxes we would have owed.

In fact, if you're going questioning whether you should stay or go, you need to go NOW to avoid taxes on a short sale or foreclosure next year. Unless the government renews the relief act, any debt forgiven will be owed in taxes, and I don't think bankruptcy protects you from it.

The short of it is this: Bank of America and our Federal government have colluded to collectively screw the American taxpayer.

1 comment:

  1. What a mess we live in. I'm so sorry for all the crap you go through.