Latest Borrower Trap? Trial Mod Offers With No Permanent Mod Terms

We’ve been focusing on the bigger picture scams in mortgage land, and realized it might be helpful to also provide occasional examples of what is happening on the ground level.

Despite the fact that the Treasury-sponsored mortgage modification program known as HAMP has been roundly decried as a disaster, it lumbers on and seems simply to change rather than improve. Not only were too few mods done but banks also lied about program features, including that many borrowers were assured foreclosure efforts were not moving ahead when they were, with the result that quite a few program participants wound up losing their homes.

Given the program’s sorry history, struggling borrowers have good reason to be wary. Lisa Epstein of Foreclosure Hamlet, points out a new wrinkle that she worries may be a harbinger of bad things to come, namely, that HAMP trial mod offers, which once described in some detail what the permanent mod would look like if the borrower made all the trial mod payments and was approved, have suddenly gone silent on the back end terms.

One of Lisa’s contacts has graciously allowed her to upload an example. Lisa says there are many she’s seen or heard of like this, it may not be the new normal, but it has become common awfully fast.

This example is useful because it allows you to see the old mod template (scroll back to see the amount of detail in the permanent mod offer included with the trial mod) versus now, which is a “see you better make these payments now or the offer behind the door explodes.” Lisa reports that the borrower, Kathleen Dalton had a trial mod offer that the payment was $161 a month (as you will see) with escrow & PNI incuded. AHMSI took a year of her payments and then returned one payment July 2011 along with a letter revoking/denial of the modification.

After a protracted fight, she got a second offer, $511 a month, but silent on terms. Lisa writes:

It’s possible (but totally unknown) if the much higher amount is because her monthly HOA fee is now rolled into this cost. What is NOT known: length, interest bearing principal, interest rate, forbearance amount, HOA amount, property tax, property insurance, HOA fees, etc.

It isn’t clear what this mean, but in general, buying a pig in the poke is not a hot idea. Reader input welcomed.

HAMP Trial Mod – Monthly Payment No Terms or Breakdown

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  1. albrt

    We live in a country where an anonymous committee with unspecified connections to the executive branch can order your immediate murder.

    The only due process you are entitled to is an assurance from Eric Holder that the committee thought about it before they signed the order. That’s the system we live in now.

    So why would anybody expect that our banker masters will disclose what monetary payments a borrower is required to make in the future?

    The borrower will make the payment the bank requires or the bank will take the house.

    Or worse.

    Much worse.

    1. Max424


      It seems we’re not far away from a time when banks will simply announce to their debt slaves, “If you don’t pony up the 200 thousand you owe us by next week, we will kill you,” and Holder and his ilk will defend to their last drop of treasonous blood, banks ability to do so.

      1. Woodrow Wilson

        “It seems we’re not far away from a time when banks will simply announce to their debt slaves” –

        Imagine Americans fighting back and killing them first? Then of course you’re labeled extreme.

        Maybe there’s something in our food, water, subliminal messaging to pacify the masses, in another era, I don’t think Americans would sit this idle. With the Rule of Law completely absent for a very few, what do people have to lose when they are completely destroyed directly or indirectly from the decisions of their own government?

        1. Enraged

          To Woodrow Wilson,

          Might be all that sugar in our hormone-packed Monsanto food. Turns men into shiftless mollusks (might be redundant…) and women into… chicken, brain, physical shape and all: small heads, hardly any shoulders and huge derrieres, exactly like chicken. Or turkeys.

  2. Jack

    What a scam. Simply mail opaque terms without any delineation or detail. I’d reject their “offer” and tell them to suck it — and then try to squat for as long as possible.

  3. LucyLulu

    My reading of the agreement is that if she made all her payments on time and sent in required documentation (??), her loan was permanently modified. The terms were 2% for 25 years on the ~$14K she had accrued in late payments and charges prior to the mod, included an escrow payment, and there would be a $99K balloon at the end of the 25 yr term representing the current principal due. They do allow themselves the right to make adjustments to escrow payments, which perhaps could be adding HOA fees, and the mod papers shown ARE unclear as to what the escrow payments of $101 actually include, but it would appear they are required to include at minimum taxes and insurance.

    So why was the trial mod not made permanent? What are they basing the denial on, the one that would be the above terms? That she didn’t qualify, but now qualifies for $511?
    It seems to me the initial mod, assuming she complied with the terms stated, making payments on time and submitting required paperwork, should be a permanent modification now. Is this one of those missing/lost paperwork mods that has been so common? Does she know a good lawyer?

    1. PL

      LucyLulu, many borrowers don’t have the ability to deduce the mod terms from a few clues in the agreement and, indeed, why should they have to? The onus is on the drafter to clearly spell out the terms of an agreement.

      Isn’t it ironic that borrowers have been criticized for signing mortgages without knowing terms during the bubble, and here we are post collapse with servicers pressuring borrowers to sign modification agreements without knowing the precise terms. Pressuring as in sign the modification as written within 90 days or you will be foreclosed when time runs out. I have one legal client who repeatedly requested clarification of mod terms being offered. The servicer delayed responding until the 90 days expired and then immediately filed for summary judgment on its foreclosure action.

      It’s a catch-22 because borrowers cannot get meaningful answers to mod terms before they sign, and later, if they discover nasty surprises like balloon payments or PITI not included in their monthly payment, the bank argues they should have asked about their modification terms before signing. The reality is that servicers don’t want borrowers to know what the mod terms are because it suits them. An ignorant borrower is a future foreclosure victim and lucrative business opportunity for servicers.

      On a related note, Yves, do you have any more modification agreements to share? The letters from AHMSI included in this post are very helpful. I am particularly interested in seeing a mod letter from GMAC.

    2. Yves Smith Post author

      No, you are conflating the old offer with the new. The new one had NO backup. Look again, it is all of one page. It did not reference or otherwise incorporate the older one. She put all the material in one ScribD document to show the history and the differences.

      1. LucyLulu

        OMG!!! You’re right, I missed that. I thought the letter that is the new mod was an addendum to the previous one, which is why I had said something about them having originally retained the right to make changes to what was included in escrow. I didn’t occur to me that one page might be a mod agreement, it looked like correspondence. It’s unbelievable that they would think that one page with no terms would qualify as any kind of agreement to anything. Doesn’t the word “agreement” imply the consent of both parties and thus two signatures? I guess they figure they have the borrower over a barrel, since they can’t go anywhere else to get a new loan.

        Yep, like PL said, its an option on a future foreclosure. And right now they want to postpone any permanent mods until they can get credit against the 49 state settlement agreement. I still wonder if she complied with all the terms of the previous mod and if so, how they can justify not having turned that one into a permanent modification. It was quite the sweet deal. My mortgage’s balance is a little less than hers and I’d fight tooth and nail to get a $161 payment, even if it meant a 25 year balloon.

        Remember when mortgages used to be assumable? Seems like centuries ago now. OTOH, that was about the same period of time my mortgage was 30 yr fixed @ 17%. Talk about insanity.

    3. Jane

      @LL – if this is a condo then she would NOT be required to pay insurance with the escrow account. Insurance on condos in Florida is paid by the Homeowners’ Association, and the payment for such is included in the HOA fees. And even though the property taxes seem small at $1200 per year, you pay taxes on what your home is worth (as deemed by the local authorities/county), not the purchase price. This condo is probably worth less than $50,000 now.

      1. LucyLulu

        Thanks, Jane! I forgot about insurance being handled differently with condos due to the building being commonly owned.

  4. Heroic Stewardess

    HAMP/HARP is irrelevant. The first question to be asked is whether someone is a “borrower”. Origination fraud, collective embezzlement, scheming perps on every side. These are great times, wonderful!

  5. Norman

    Wasn’t it in the movie Godfather # 3 that the “Family” was going legit, so to speak? Well, here we are today, viola! Bet you never thought this would come to pass?

    1. jerry 101


      That’s something I’ve said for a while, only half-jokingly.

      The mob realized that vice wasn’t paying well enough. The real money was in high-finance.

      So the mob went to Wall Street. A lot more money there than in shaking down small business owners and trying to traffic drugs.

      Plus, wall street guys never go to jail unless they’re busted for insider trading or running a ponzi scheme. Wise guys can go to jail for all sorts of stuff. Possession of marijuana = government sends you jail for a long time. Systematically defrauding the people of the United States out of untold amounts of wealth = government rewards you with more of the wealth of the people.

  6. Jim A.

    Trial mods were never intended by the banks to be a template for a permanent mod. Really they’re just “keep ’em paying SOMETHING while we figure out just how much blood we can get from this turnip.”

  7. Peter Pan

    This is just another shining example of what’s typically on offer from Team Obaden: a promise of false hope for some vague change.

    Better off to stop paying and live rent free for a while. The money saved can be placed into two funds, one for paying deposit and rent when you move out, the other for legal offense (lawyer ball) to make the bank’s lawyer miserable and to erode the value of the property over time.

  8. hello

    The situation here sounds like a classic first-year contracts exam question.

    Don’t know the applicable law in Florida, but I’d assume the most favorable terms for Ms. Dalton, send a confirmation letter stating those assumptions and wait for a response if any.

    1. PL

      As someone who sat for first year contracts exam in law school, I’d say the letter you propose sounds like a reasonable response to an ambiguous offer. But as a lawyer for 20 years currently representing clients in foreclosure, I know that such a response will lead to litigation and any modification agreement will include the legal fees added to the loan balance ultimately harming the borrower. Modifications are contracts of adhesion where the servicer has all the bargaining power, writes favorable terms and will not negotiate them or necessarily disclose them.

      1. Jim A

        Sure, it’s a contract of adhesion. The original contract was canned too. Try comming back different contract terms on closing day and seee how well THAT works. But how can you be bound by a contract the terms of which you weren’t even shown? That you had no opportunity to review?

        1. PL

          Good question. A court may find that you can’t be bound by such a vague contract, however, what homeowner wants to take that risk? Or absorb such litigation costs? That’s what servicers are betting on.

          1. Ms G

            This is precisely the set of circumstances that would justify the intervention of an Attorney General (on behalf of all borrowers holding the same boilerplate b.s. mod “deal sheet”) who could take on the issue of the unenforceability (under black letter contract and comsumerlaw) of contracts (1) missing material terms,(2) vaguely drafted (and thus subject to the rule that ambiguities are to be construed against the drafter, i.e., banks) and (3) unconscionable under the drafter’s interpretation.

            Too bad all the AG offices across the country are Missing in Action in their primary jurisdiction, having been “seconded” (and thus locally disabled) to the Ra-Ra New + Improved Financial Crimes thing that Obama pulled out of his hat recently.

            It is less clear why decent class action firms have not stepped into the breach here.

          2. LucyLulu

            Mrs. G.
            Because the servicers also collect subsidies for offering trial mods from HAMP, it seems the state AG’s could also tack on some charges for acting in bad faith. They all received money now, some of it was set aside for the AG’s to pursue investigations and prosecutions, let’s see if they use any of it. I won’t be holding my breath in my state.

            I have a jaded view on class action suits. They are quite lucrative for the attorneys who win large settlements but the payouts to the injured parties typically run about $57. I’ve been the beneficiary of three or four class action suits now and the sum total of my awards has been somewhere around $300. The plus side is that all they have required was to fill out a postcard and mail it in, having no prior knowledge that I had been injured by the party named in the suit (or since), so I can’t really complain. My point is that I don’t know that a class action suit is an appropriate way to seek redress. My method of choice remains la guillotine.

  9. Javagold

    A DEBT COLLECTOR ATTEMPTING TO COLLECT A DEBT…..This says ALL WE NEED TO KNOW….they own nothing , have no standing and are not owed one penny ……OUR HOUSES HAVE BEEN PAID FOR !!

  10. Gamin It

    ‘Bank of America NA, Chase, Wells, Capital One, Ally, et al all prevented homeowners from receiving mortgage-loan modifications under the federal government’s HAMP program in order to avoid millions of dollars in losses, while benefiting from financial incentives for participating in the program.’

  11. chris m

    “trust us”. obama won’t use his power to kill whoever he wants for the wrong reasons and the banks will treat fairly in the final mod process homeowners who comply with trial mods.

    how long before the pred drones come for the deadbeats?

  12. WobblyJim

    A comment from someone who is not involved in this fiasco.

    Currently there is major concern about chain of title.
    The original paperwork/contracts are missing in the majority of cases/mortgages/loans.

    This exposes the banks/institutions to major risk of losses.

    What better way of “fixing” this exposure than to scam the borrower into signing away previous rights and to set up a new, fresh set of contracts that would eliminate the banks’ losses and re-set the trap for the borrower ?

    Just thinkin’ aloud.


    1. PL

      Mods are the most efficient “fix” the chain of title problem from the note owners perspective, but they are not agreeing to them for the most part. Note owners and servicers seem to be too greedy to allow modifications affect their bottom line.

  13. Bridget

    It looks as though the cover letter was the same with both offers, but the second offer did not contain the attachment spelling out all of the details. Who knows whether this omission is due to sloppiness or represents an all new modus operandi on the part of AHMSI.

    It hardly seems to matter if AHMSI aka debt collector aka scam artist can unilaterally revoke the agreement. Of what use was the attachment with the details to this borrower? If she thinks it’s worth paying the monthly amounts in order to stay in the house, then she might want to do so, but she obviously has no guarantees. A copy of the letter she received revoking the mod would possibly be illuminating. Perhaps her financial circumstances changed for the better during the first year trial period, thus negating the terms of her first deal? (The terms of which, btw, seem too good to be true, leading me to wonder if she is being scammed. I don’t know anything about the permissible parameters of HAMP mods, but I have a very hard time believing that the terms she received are the norm)

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