AFTER Covid Mortgage Forbearance – Strategies You can Use to Keep a Home — Reboot Your Life: Tampa Student Loan and Bankruptcy Attorney Blog — September 16, 2023
Once you get out of the habit of making a mortgage payment, it’s hard to get back to making that large payment every month. This is particularly true, with student loans also restarting payments now.
What do we do that can help solve this problem for you?
We litigate mortgage claims, assert consumer defenses when available and defend foreclosures in Florida. State law relating to foreclosures vary widely and we limit our practice strictly to Florida for mortgage related issues, generally in the counties surrounding Tampa Bay. We’re a member of a local Tampa Bay foreclosure defense attorney group, and NACA which is a national consumer advocacy group where consumer attorneys share ideas, tips and trends.
Mortgage servicers have figured out how to make money during this crisis. Normally, when a mortgage loan defaults, the servicer still has to make payments for the most part. Fannie and Freddie however capped the servicer payments to three payment advances. Mortgage servicers took this one step further, and borrowed money for nearly nothing, and bought these mortgages from Fannie/Freddie and have no obligation to make payments on defaulted mortgages. Then they’ve bundled these into pools and have sold them to other non-governmental agencies.
So what does this mean to you? Whoever owned your mortgage prior to Covid, likely doesn’t own it now.
The training provided to customer servicers is often abysmal. This results in lots of wrong answers and a tool we can use called a Notice of Error. How do you know you are getting inaccurate information? One easy method is to call your servicer multiple times, talk to different reps and see how many different answers you get. To be fair, there are lots of different programs, and lots of borrowers. Expecting correct answers in the amount of time each rep has per phone call is a pretty high bar. But I look at this as who is the best person or company to bear this disconnect? The servicer is making money, they could hire and train more reps. Why should the misinformation be bourne solely by the homeowner — who is likely risking their largest investment and the roof over their head, on getting it right.
Many consumers have not needed nor wanted a forbearance, and have tried to make automatic payments, but the bank or servicer has put them into forbearance without their permission. Remember, the CARES Act allowed for borrowers to place their mortgage into forbearance by simply asking for a forbearance. Borrowers can also ask for the forbearance to end at any time. But borrowers have seen their mortgages put into forbearance or left in forbearance and have had a hard time getting them out. Why would a bank/servicer do that? Well they can borrow funds at nearly nothing, and they can do an early payment buyout with Fannie/Freddie.
Virtually all Covid protections have ended or will end next year.
If you are just coming out of forbearance, here is what you need to know.
What opportunities exist to modify your mortgage?
When should you expect a denial of a mortgage modification? When your payment is going up per the waterfall calculations? How to turn this around? Freddie and Fannie allows exceptions. Most people cannot make a lump sum payment to catch up the missed payments including escrows for insurance and taxes. Proof of income is no longer required.
What if you’ve already had three loan modifications? And if you are more than two months in default at the time of forbearance, you can expect a denial. Ask for an exception. File a notice of error that the borrower did not receive information that following a forbearance they would not be given a modification to catch up. Get familiar with the new successor in interest rules for a divorce or death in the family.
File a CFPB complaint. Ask them to investigate. This will get a servicer’s attention.
Raise FCRA claims for inaccurate data on your credit report.
Assert FDCPA or FCCPA claims for debt collection violations.
Do you need an attorney to do these things? Do you do this day and day out? Probably not. While you can represent yourself, unless you are a mortgage professional, I’d suggest that you do need an attorney to assist in getting and keeping a loan modification. This is your biggest asset. These are steps we can take for you, we know how and when to do them, and will track them — this alone is a big deal in a world where it’s so hard to fight a mortgage servicer who says they never got something.
How to put yourself in the best position to fight your mortgage company? Tell them multiple times that they are doing something wrong, tell them how to do it correctly, and keep track of these communications.
What happens if you actually get a modification, but then the new mortgage owner or new servicer won’t recognize the existence or board the modification?
For those with VA loans, if your pre modification PITI payment is already at less than 31% of gross income and your payment goes up, it will be denied. The VA will say the payment cannot go up – higher than 31%. While they will cave, it may get very messy and a modification may only occur after multiple notice of errors and litigation.
REG F: A servicer must send a validation notice breaking down every fee and expense. See Section 1006.34. It is a FDCPA or FCCPA violation if a servicer fails to send this validation notice.
Ask for a streamlined mod – to avoid dual tracking problems.
What if you have a non-gov’t backed mortgage such as a private mortgage. If the interest rate is high enough, many lenders will prefer to keep the borrower in their house, and extend the maturity date out three years or to a 480 month mortgage.
What does a mortgage modification look like?
What if you receive a mortgage mod by snail mail — days or weeks after the acceptance date? File a Notice of Error and ask for the vendor mailing logs and servicer logs.
When shouldn’t you do a mortgage mod?
Strategies for government backed loans?
Strategies for non-government backed loans?
Has your servicer followed the law? How we can use servicer errors, ignorance and stupidity in your favor? Servicing missteps can cost you a lot of money and even the loss of your home. They also can be grounds to sue under RESPA, TILA, EFTA and state UDAP claims – which can result in money in your pocket as well as a better modification.
Future problems? Facing servicer intentional delay for higher interest rates. Servicers have a duty of reasonable diligence to process a complete application.
Where can you get the best mod – before a foreclosure is filed, in state court foreclosure proceedings, or via the portal in bankruptcy? Which Chapter of bankruptcy will help you keep your home?
And perhaps most importantly, is it wise to keep your home or should you give it up — while protecting yourself against any deficiency or other fees/costs?
We can help if you are located in Tampa Bay or its surrounding area.
