Salinas, Calif.-Amid signs the housing industry is coming back there's still trouble out there, some say the banks are not playing fair. Real Estate experts tell Central Coast News' Center for Investigative Action that a majority of those seeking loan modifications are getting the runaround for months while their personal finances continue to deteriorate. In some cases loan modifications offered have higher payments than the original loan.
Vietnam Vet Patrick White and his wife Bridget have lived in their home for 34 years...tough financial times hit them in 2008 and both are on now on Social Security's Supplemental Security Income. " You raise a family to be decent people and you live in one house all your life and then they want to take that away from you."
After 3 years of going back and forth with Chase Bank, the Whites say Chase told them to "take this loan modification deal or leave it" in 2011. They took it reluctantly not know any other way out. Bridget says, "Well...when you apply for a modification it means that you're trying to modify the terms of the loan and lower your payment...and afford to eat!"
But that's not what happened for the Whites. Chase offered to reduce their principal by 150 thousand dollars, but the bank kept their interest rate the same at 6.75 percent. Chase also rolled the Whites' taxes and insurance into the loan modification. The final result? Their loan modification payment actually increased by 159 dollars a month to over 3200 dollars!
The Whites wanted help, but thought they were being taken advantage of. "We wanted an amiable approach to a loan modification, not this greedy attack. I feel like we were attacked by a pack of wolves."
Central Coast Real Estate expert Ruben Dominguez and nominee for California State Real Estate Commissioner said the White's problem is a systemic one. Banks don't follow any standard guidelines, which give them the license to take the upper hand in the loan modification process. Dominguez believes the White's case could have been handled better.
"The loan company in really wanting to help the Whites probably should have adjusted their interest rate as well." Dominguez said what's troubling is unfair loan modifications are still the norm. So how widespread is this problem with loan modifications dragging out and not providing real help to the borrowers bottom line? "It's happening about 80% of the time...about 20 percent of the people are getting decent modifications."
Dominguez said common sense tells us that some borrowers shouldn't be worthy of a modification due to current debt on the property or a lack of ability to pay their current loan. but the Center for Investigative Action learned some banks keep unworthy borrowers in their homes at interest rates higher than the prevailing rate, because the banks make more money on these loan modifications.
"I believe the banks are the causes of the situation we're in, but there are people out there that should never been able to buy a property." says Dominguez.
Miguel Bustos is Wells Fargo's Northern California Regional Servicing Director for loan modifications, "I don't think the bank is the bad guy."
Bustos said Wells Fargo has led the way in creating a single point of contact for distressed borrowers to minimize confusion in the loan modification process. He says each group of loans is owned by different entities such as private investors or the government and these loans have specific qualifications as to who's worthy for consideration, so qualifying takes time.
"It could be a lengthy process it can be complicated. we're asking for a lot of paperwork, but it's necessary paperwork."
But in the meantime, homeowners are falling further behind as they wait for the banks to even come back with an offer on the loan modification. Even so Bustos says borrowers should call the bank as soon as they know they can't make a payment. "It's really about building that bridge and communicating with your lender."
As for the White's, Chase spokesperson Amy Bonitatibus told us in a statement, "We provided a principal and interest reduction where their payment actually went down 200 a month. But we also added an escrow account which eliminated their out of pocket expenses and added them to the monthly payment which ended up being a total of 159 dollars more a month."
Bonitatibus continues, "Each homeowner's financial situation is different so we look at every loan on an individual basis."
But Dominguez says that's part of the problem...there needs to be a streamlined approach to these modifications. "They need to do something within 6 months. They need to help the consumer during that process, beyond that we need legislation to force banks to comply and straighten this mess out."
We reached out to Central Coast lawmakers who say the 17 billion dollar National Mortgage Settlement passed by congress, that took affect in California on January first, is the first step in making the loan modification process more equitable.
The agreement now forces banks to facilitate loan modifications with principal and interest rate reductions, short sales, single points of contact, borrowers can appeal a loan modification denial and plenty of notices to borrowers prior to default and foreclosure. Other than that, lawmakers say no new legislative action is being taken.
For Patrick and Bridget White, they just want what is fair, "They get their money, we keep our house...that's what we would like. but I don't think that's going to happen."
Since investigating this case, the White's in conjunction with Dominguez arranged a short sale of their home and the new owner is renting the home back to the Whites for 13 hundred dollars a month. So the bank received money and the Whites are staying in their home of 34 years. But only after years of stress and manipulation by the bank.
