Loan Modification, Aurora Loan Services, and Fear

Dear MortgageMaster,

I am wondering if I am also at the start of a bad experience with Aurora Loan Services. Let me start by saying that at this point I have never been late with my mortgage payment of $740.36. But after being laid off and subsequently taking a buyout from the auto industry, my family’s income has significantly dropped. For this reason I asked Aurora Loan Services if I was eligible for a modification under the Obama Plan. They assured me I was and took my info over the phone, coming up with a new payment amount of $736.54. The payment has not dropped much, but my new payment would include escrow for taxes and ins that my old payment does not. They mailed me the modification papers around May 24, including the trial payment plan details, financial affidavit, etc. with a due-back date of June 16. No problem. I filled everything out, copied all my financials, sealed it up, and sent it out June 1, 2009 in the preaddressed/postage paid envelope they provided. I might mention that while on the phone with the initial representative I consented to have each of the 3 trial payments automatically come out of my checking account on the first of the month in which it is due (with the first due July 1, 2009). On June 16, I called Aurora to make sure my paperwork had made it by the deadline and was told it was not in the system yet, but they were “bogged down with lots of them, try again next week-they should be there). The next week I called Aurora, still no sign of my paperwork and I’m told to call in a week once again. June 30 I called back, concerned that my first trial payment is coming out but they have no paperwork for a modification plan. I’m told “don’t worry about it. Send the paperwork that I have, (which is not all of it) via fax.” At about this time I’m starting to get a bad feeling. I have one set important financial information floating around ALS, a trial plan payment coming out, and no proof of any modification plan in my hand because I sent both copies back as instructed. Not a good place to be at. My unease leads me to the BBB to see if Aurora has any bad listings due to the mod program-nothing much specific there. I do a search on Aurora Loan Services and come back with a nightmare of bad experiences people have had. Now I feel sick. I watch my bank account for when the trial payment comes out, which it did, for the $736.54. Then I log onto my mortgage account and the first thing I see is my July 1, 2009 payment is still due in the amount of $740.36. So I look at where my payment was posted and instead of principal/interest/escrow the money was posted under “other”. What the heck is that! And the system says I’m not paid for July! I’m not waiting for 3 months of the system saying my mortgage is behind and possibly starting foreclosure proceedings. I guess my only choice is to make the July regular payment and try to get the other funds released to me and the “mod program” stopped. Do I have a legitimate concern? Could I be blindsided by Aurora if I leave things the way they are? Or am I just overreacting to the horror stories I read online?


Thanks for any input,
Melissa K

Melissa,
Your experience unfortunately is not unique these days and it's not just Aurora. Secondly, you are not being paranoid or overreacting. The bigger loan servicers, in particular B of A/ Countrywide, can be particularly onerous to deal with. Aurora is not much different. Bottom line advice to you or any other person trying to do their own loan modification would be to keep extremely good records of what you have sent (always keep copies), who you are talking with, dates and time, extensions or direct lines if available, list of promises made and whom to call when you haven't received what you've been promised. Most importantly is follow up. Our firm has had some success by calling back sooner than later and also more frequently, in particular once we have some contact person in an organization that has been responsive. If your property is in jeopardy of foreclosure/sale, it is all the more important to follow up sooner rather than later and find out whom to contact at the company facilitating the sale. We recently negotiated a forbearance deal and only when we got the fax from the servicer saying the sale had been postponed did we actually feel like we had some success. To get there required multiple phone calls and faxes and lots of good record keeping.
With respect to your individual situation, do your self a favor and do a print screen of any withdrawals that have been made from your bank account and also do print screens of your account at Aurora. This will possibly be your only hard copy for purposes of backing up your story. If you are not getting any response, be prepared to spend a lot of time on hold. Continue to make the payments that you promised to make as this will most certainly show compliance from your end and you will point to this when you call them. Again, make a print screen of the withdrawal and also print screen to show how payment was applied.
It also helps to keep in mind whom you are dealing with on the other end of the phone. Often times that person has been on the job for only a very short period of time and won't know a whole lot. If you feel like your are simply educating that person by repeating your information again and again, don't hesitate to ask for a supervisor, or in some cases being polite telling them you've got a screaming kid and you'll have to call back. While not the most pleasant thing to do you are rolling the dice that you'll get someone else who is more experienced when you call back. Also, demeanor is really important on the phone. It might sound like a cliche, but you really do attract more flies with honey than you do with vinegar - i.e. be nice to the person - chances are really good that they have been screamed at for the last 5 phone calls and called every name in the book.
I wish you luck. A loan modification can be akin to a marathon in that it is often a very long process.
Regards,
Gregory T. Royston, Esq.
South Bay Law Group, P.C.3848 Carson Street, Suite 204Torrance, California 90503
www.sbaylaw.com
Office 310-780-8275
Cell 310-977-1062Fax 310-943-1472

Despite positive numbers, the slide will likely continue!

Yes, we are seeing more first-time homebuyers purchasing the American Dream. Yes, the discounted prices that foreclosures offer are attractive. We are, however, far from the point where prices and capacity to purchase are at equilibrium.

At the peak of the housing market (Q2/3 2005) no more than 11-15% of people had the ability to buy homes in all of the major metropolitan areas. The "Affordability Indices", community-specific measurements of those who could afford to buy a home, were ridiculously low, despite the availability of exotic loan products designed to keep payments reasonable. The prices of homes soared to completely unsustainable levels. Based on these indices, 85-90% of the population would be condemned to a life of renting. Of course, this trend was both economically unhealthy and totally unsustainable. We all know what happened since.

Home prices have now seen some pretty serious declines in some areas. Based on the CNN article, we have seen prices fall as much as 59.1% (Cape Coral-Ft. Meyers FL), year over year! The serious declines in value, combined with tax credits, FHA lending, and the perception that we are close to "the bottom" has enticed many buyers into the world of homeownership.The good news is that first-time homebuyers are getting financing and buying homes. The mortgages people are qualifying for are, for the most part, sound products with little controllable risk. Given that most buyers (investors/flipper excluded) will remain in their homes for at least five years, these new buyers are likely to be making sound, long-term investments. It is my contention, however, that these low priced opportunities are far from the bottom, pricewise.

Despite the contentions of NAR's Chief Economist, Lawrence Yun, that this is a lull before the upturn, I believe that we are still at unsustainable price levels and that the existing "A" paper and "Alt-A" paper loan portfolios are conspiring to drive values down another 10-20%. If you look at the WFB/NAHB Index of Opportunity for 231 cities, from May 18, 2009, you will note that many of Electoral Colleges "Big Six" states (CA, NY, TX, FL, IL, PA), and their respective large cities, are represented in the lowest quartile (32 of 57). The suggestion being that a huge portion of the population lives in areas where homes are least affordable.

It is a fairly reasonable contention that either incomes need to increase significantly (not likely), mortgages need to be made more affordable (possible, with caution), or that values still need to be brought in line with incomes. We have seen some laudable efforts to drive rates down and have witnessed the resulting run in loan originations. The likelihood of continued low rates, for the short-term, is pretty strong. I believe that the government will do what is necessary to keep rates down…even if it has to buy the bonds itself to keep yields low. But rates can only go so low; prices still need to come down. The latter is the path of least resistance given the amount of inventory and the pending "A" paper crisis.

The Subprime crisis is winding down. We still have a tremendously large amount of "A" paper loans that will be adjusting and a really, really dangerous inventory of Pay-Option ARM's which have started to re-cast as I type. The details and mechanics of these loans make them nearly impossible to “modify" and will necessarily create a tremendous amount of foreclosures in areas ranging from the lower economic strata to the highest. The subprime loans were the tip of the iceberg.

So, yes, we are seeing a dramatic increase in some areas that were hit the hardest. Yes, there is more optimism on the streets regarding housing opportunity. We are even seeing some lending happening! We still need, however, for prices to adjust to reasonable levels. I am not an economist, nor do I know what levels of homeownership and affordability that are necessary for a healthy economy (I have heard figures in the 70% area), but I do know that given current income levels, home prices need to still come down to a point where an average American family can buy a home.

Although I believe we have some serious pain ahead regarding home values, I also believe that the resulting opportunities will be a welcome relief to an American middle-class that needs relief from the high cost of home ownership.

Joe Chatham

Hope Now Information

"Dear MortgageMaster,

What is FED/MOD?

Melva

Melva,

I am assuming a Fed/Med is a federal loan modification. I am also assuming you either heard someone talking about it or you were solicited using this term. Either way, it is probably referring to the federal loan modification program, Hope Now. This is taken directly from FHA's site, including contact number:


HOPE NOW
HOPE NOW is an alliance between counselors, servicers, investors, and other mortgage market participants. This alliance maximizes outreach efforts to homeowners in distress to help them stay in their homes. Its purpose is to reach and support as many homeowners as possible. The members of this alliance recognize that by working together, they will be more effective than by working independently.
Are you having trouble paying your mortgage? Call the Homeowner’s HOPE™ Hotline: 1.888.995.HOPE or go to their website at www.hopenow.com. Do it today!
Good luck!

MortgageMaster

Commissions For Loans and Note Modifications?

Hi, Are there any regulations regarding the disbursement of commissions via a mortgage transaction? Can a company sign up independent agents who work as an independent contractor to market refinance and modification loans for a financial institution and receive commissions from that company as an independent contractor? Please advise... Thanks, Gary

Hi Gary,

It sounds like you are describing a mortgage broker: a person who markets lending services and then places his/her clients with a lender he/she/it (if incorporated) has "Broker Agreements" with. Mortgage Brokers specifically work as Independent Contractors for the lender(s) they have agreements with. They are paid commissions for successfully closed deals. Otherwise they would be employees and bound to sell the loans of that company only...not to mention the myriad of tax/compensation issues the lender's wish to avoid. With regard to the loan modification side of it, I would SUGGEST that the same is true. The Loan Mod industry is relatively new and mostly unregulated. I would venture to guess that ANYONE can collect commission on these files. I have heard talk that some regulatory agencies are looking into regulating this industry...but nothing concrete so far.

MortgageMaster

Escrow Funds, Continued

Hi,

Please see my comments, in YELLOW CAPS, interspersed throughout your letter:

"Hello,


Thank you for getting back to me so quickly. This was, and still is, a complicated situation. From your response, I can see that there were some things that I didn't explain clearly. I thinks it's because I'm so tired of telling my story!!! However, that certainly isn't your fault. As far as the first contractor, you're right in that I didn't allow him to finish all that was on his original estimate. It was mainly the hardwood flooring that he had nothing to do with. The hardwood flooring has been installed and the company has been paid. Once the contract found out that he wouldn't be doing the flooring, he got ticked. I had been in contact on a regular basis with the mortgage company and they were aware that I was not intending to allow him to complete all of the work that was in the original estimate. There is some work still not done, mainly painting. I have since had to have a painter come in and repaint my house because the painting was soooooooooooooooooooooooooo bad, but he only got the upstairs done. I also had to have some other things done that he simply didn't finish. All of that stuff has been paid for out of my pocket. Therefore, there is no money that needs to go back to the insurance company. I even had to pay for part of the hardwood flooring out of my pocket. SEND YOUR RECEIPTS TO THE LENDER WITH A LETTER DETAILING WHAT HAPPENED. SEND IT CERTIFIED, SIGNATURE REQUIRED, TO THE PRESIDENT OF THE LENDER (THIS IS KEY)!


Once the adjuster was told that the contractor would not be completing the floors, he called the contractor and asked for a final bill. DID THE CONTRACTOR SEND HIS FINAL BILL? WAS HE PAID, ALBEIT HIGHER THAN QUOTED, THE AMOUNT HE BILLED? THE CONTRACTOR HAS A RESPONSIBILITY TO BILL IN A FAIR AND TIMELY MANNER. IF YOU HAVE A COMPLAINT, THREATEN THE CONTRACTOR WITH A FORMALIZED COMPLAINT TO THE STATE REGULATORY AGENCY HE WORKS UNDER. NOBODY LIKES "DINGS" ON THEIR RECORD! When I talked to the mortgage company asking for the remainder of the money, they told me that the contractor and I would have to sign off and then they could release the money back to us. I STILL DO NOT UNDERSTAND WHY THEY WILL NOT GIVE YOU THE MONEY, IF QUALIFIED TO BE GIVEN TO YOU, IF THE ORIGINAL CONTRACTOR WAS PAID. IT SOUNDS LIKE HE HAS NOT BEEN PAID YET, OR THAT HE HAS BEEN PAID BUT WILL NOT SIGN OFF ON THE FACT THAT HE HAS BEEN PAID. THUS, LEAVING THE LENDER WITH THE IMPRESSION THAT THE CONTRACTOR MAY STILL MAKE CLAIMS. TELL THE LENDER/ADJUSTOR TO ASK FOR THE FINAL BILLING AND HAVE THE LENDER HAMMER IT OUT WITH THEM. AFTER ALL, THE CONTRACTOR PROVIDED A WRITTEN ESTIMATE (I HOPE!) AND IS BOUND TO HIS ESTIMATE WITHIN REASON. OTHERWISE, IT IS SIMPLY SOUR GRAPES AND I SUGGEST FILING A COMPLAINT AGAINST THE CONTRACTOR. THE LENDER IS RIGHTFULLY FEARFUL THAT A LIEN COULD BE FILED. THEY ARE CAUGHT IN THE MIDDLE. They asked for a whole letter from the contractor since the amount he would be paid was less than the original estimate. I have explained to them that the amounts differ because he didn't do the floors. However, the contractor wrote a final bill for what I supposedly still owed him. The problem is that on the final bill, he didn't take the original bill and subtract the flooring, which would have made perfect sense and would have been fair. Instead, he added charges that weren't on the original bill. For example, on the final estimate, he added a charge for $1,500 for prepping the ceilings and the walls for painting!!!! Basically, he was ticked about losing the flooring money, so he was trying to get the money in another way. I explained all of this to the mortgage company and I asked them to get involved, but they refused to do so. So, the bottom line is: The mortgage company will not release the funds to just me until he signs off because he could put a lean again my property. I think that is wrong of them because I feel they should be looking out for me, but they aren't. AGAIN, IT IS THE CONTRACTOR WHO IS CREATING THE PROBLEM. FILE A COMPLAINT!!!!


I contacted the contractor and we got nowhere!!! I finally got an attorney, whom I asked to simply call the contractor, rather than doing all of the legal paperwork, but she didn't do that. She did call the contractor's worker, who owed me $1,000 for some furniture, but she said the contractor owed me more money so she would have to start in writing. Again, I asked her not to for a couple of reasons: 1) to save me money; and 2) so he wouldn't get intimidated by the legal part of it and feel he had to contact, and in turn, pay his attorney. At the beginning, he was willing to sign off, but once he saw all of the paperwork, he said he would need a week for his attorney to look over the paperwork. When the week was up, she called him back and he stopped returning her calls. I don't know if it's because his attorney found a loop hole for the contractor or what. I have since talked to the attorney and she told me it wouldn't be worth taking him to court because I would spend more than I'm trying to get back!!!! That ticked me off since I have already paid her over $1,000, but the worst part was that after she told me that, she left another message for him saying that if he didn't return her call, then I would file a law suit!!! Why she would tell him that if she told me it would cost that much, I don't know!!!! I am absolutely fit to be tied!!!!

FILE A COMPLAINT ABOUT THE CONTRACTOR! YOU MAY NOT NEED AN ATTORNEY YET!

I am going to contact the mortgage company tomorrow and I am going to ask them for assistance one more time. If they won't help me, then I am going to go to their regulatory agency. Would that be the FTC? Is that the appropriate person for me to contact? I'm not sure if I understood the part you wrote about escrow. You said that's a third party, but I think they are just holding the money in the mortgage company. ESCROW CANNOT RELEASE FUNDS UNLESS THE LENDER AUTHORIZES THEM TO DO SO. I WAS GOING TO SUGGEST CONTINUALLY FOLLOWING WITH THEM, BUT IT ALL STARTS WITH THE CONTRACTOR. Does that make sense?? Should I expect them to give me the money since he won't sign off or not? Should I expect them to help me by contacting him or not? They sure wanted to know everything about him as far as making sure the work would be done properly and all, that he was licensed, bonded and insured, but now that he is being an idiot, they won't help me!!!!! I am not in the wrong in this situation, but yet I can't find anyone to help me. Could I expect his insurance company to help me or my insurance company??

Help!!!!!! Not only am I out all that money, but I STILL have to hire a painter to fix the incredible MESS he made in my home!!!! How can he get away with this???

I would appreciate any help you can give me.


Thank you,



Robin"

Picking Mortgage Insurance Companies

Does a person have the right to try to obtain their own PMI or do they have to accept the lenders choice ?

Don

Don,

I have never, in 20 years, had a client specifically request an MI company. The fact is there are only a few providors of mortgage insurance: PMI, RMIC, CMG, MGIC, and maybe another one or two. The afmorementioned are, however, the larger underwriters. The way the process works is that your lender submits loan files to one or more of the mortgage insurance companies and hopes that they will get an approval. if a MI company will not approve the policy, the lender will not do the loan (unless they choose to self insure, if available). Thus, the loan is really not approved until the MI company says it is insurable.

While you can ask your lender who they use for MI (as most will use several), and say you have a preference amongst their carriers, the real question is who is willing to approve the loan. Generally, the lender will send it to the MI company they feel will get the loan insured. If all are willing to underwrite the loan's MI, I suppose their could be differences in their premiums, but it is probably nominal. In addition to the need for getting approvals, the lenders are likely to lean toward the MI carrier(s) with the lower premiums: lower premiums = lower debt ratios = more approvals = more revenues.

If you still want to pursue this, ask your lender if they will let you select amongst their MI vendors and if there are differences in the premiums.

I hope this helps.

MortgageMaster

Are 10 Year Mortgages Legal In Texas?

Can you tell me if 10 year mortgages are legal in the state of Texas? We were told by our "out of state lender" that they were not legal in Texas, but they gave us one anyway. Since then, Wells Fargo has purchased the mortgage & we have 4 1/2 years left to pay. Due to family illness, we must lower our monthly payments & are trying to work with the bank. If they are illegal will that give us any leverage in dealing with the bank?

Thanks,
JM

Hi Jane,

I say this with the caveat that I am not licensed in Texas. Thus, I am not an expert nor can I offer a legal opinion. I can, however, tell you that I called four separate mortgage companies located in Texas and asked them if a ten year mortgage was possible. Without exception, they all said they could offer 10-year conventional mortgages. The each noted, with prodding, that they could not offer 10-year mortgages on the FHA program. I know you are searching for options. Given that you are currently in a ten year, with a ten-year amortizing payment, I would be pretty surprised if your lender did not offer to modify the loan into a 30 year at a reasonable rate for you...assuming the 30 year payment would be affordable for you. As I have stated many times, lenders do not want to foreclose. If you can make the 30 year payment, I am sure they will work with you.

MortgageMaster