Investor Based Denials, HAMP, Wells Fargo, Cash Deposit Requirements and Loan Modifications

01 Jun

A Free Lunch That Wasn’t Free

from The Housing Bubble Blog by Ben Jones

A report from the New York Post. “Thousands of Americans expecting to keep their homes after starting trial modifications on troubled mortgages could wind up in foreclosure anyway, thanks to a murky technicality known as the investor-based denial. Since launching its Home Affordable Modification Program (HAMP) last year, the government has buried in the fine print that not all 60-day delinquent loans are eligible — and one major exclusion is investor contracts that preclude modification.”

“In many cases, a shadowy investor or group of investors actually owns the debt. These investors can put the kibosh on converting a trial modification to a permanent deal, without the homeowner even knowing the investor’s identity or reason for rejecting the workout. Many homeowners undertake trial modifications — with a reduction in monthly loan payments — only to be told months later that they can’t convert to a permanent modification because the investor won’t allow it and they now owe thousands in back payments.”

“‘A lot of times there are no restrictions, and if there is one, it is usually limited [and] does not prevent the servicer from modifying under HAMP,’ says Margot Albert, staff attorney with Staten Island Legal Services. ‘[Servicers are] using any investor restriction as an excuse not to modify loans, even if there is another way under HAMP.’”

“Natalie Reyes fears she will lose her home after getting a confusing investor-based denial. Reyes bought a modest two-bedroom house in 2006, moving her twin daughters from a rough-and-tumble Brooklyn to Staten Island and a better shot in life. Reyes scaled her real estate dreams to fit her budget as a single mom and New York City employee. But when an FHA loan at 4.25 percent fell through just days before her closing, she believed a smooth-talking broker who promised easy refinancing on an adjustable-rate mortgage. Rather than lose her deposit and the house, she took an ARM at 7.625 percent.”

“By completing three trial payments and submitting the appropriate paperwork, Reyes expected her loan would then convert to a permanent modification, as outlined in HAMP guidelines. Instead, she got the shocking news that her modification was denied. Reyes continues to make the payments agreed to in her trial modification, and has turned to Staten Island Legal Services for help.”

“‘Hopefully Wells Fargo [and] whoever is making this decision gets to know that behind this loan number there are people, struggling people putting all their efforts and savings on the line,’ said Reyes. ‘If I lose my house I’m walking out with nothing, and hopefully they realize this.’”


As always, this was just the first story in a whole series of incidents and events Ben chronicles under this headline, if you want to read more, just click on his title above, or

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