WE ARE A DEPT COLLECTOR. THIS IS AN ATTEMPT TO COLLECT A DEBT...WE HAVE TOLD A CREDIT BUREAU ABOUT A LATE PAYMENT, MISSED PAYMENT OR OTHER DEFAULT ON YOUR ACCOUNT. THIS INFORMATION MAY BE REFLECTED ON YOUR CREDIT REPORT.
So reads a portion of a letter I just received from Ms A, a Loan Workout Specialist working for Washington Mutual's Early Loss Mitigation Department, with whom I've been attempting to negotiate a mortgage modification for several months. The odd thing is that I have never, ever missed or been late on a mortgage payment.
I saw trouble ahead quite some time ago and started seeking, first a refinance and then a mortgage modification in the hopes of avoiding a default that certainly will but has yet to occur.
On a brief personal note, although I am loathe to plead my individual case herein, I believe that I am representative of a significant number of persons for whom mortgage modification makes sense and represents an equitable and mutually advantageous compromise between borrowers and lenders.
I chose a five year adjustable rate mortgage because the interest-only payment it offered was a more affordable way for me to remain in the family home with my two children after a divorce, which required that my wife receive in cash her community property share of the home equity. My plan was to remain in the home until such time as I retired and the children came of age, which coincides with the significant fifth year rise in the mortgage payment. It was my intent at the end of the five years to sell the house, and with my half-share of the remaining equity, realize enough gain to have enough for a down payment on a smaller retirement residence. The house needed only to maintain the value it had at the time of the divorce for that to occur. But the house has lost value and, taking transaction costs into account in the event of a sale, is worth just about what I owe and its value still heading south. It is true that I can walk away from the home and that because my pension and savings are safe from further claims by the bank, I will not be rendered destitute. But to do so will ruin my credit, not appealing proposition as it might take me until I'm 70 years old to restore it.
Recent news would appear to indicate that banks are having a come to Jesus moment when it comes to mortgage modification. See for example JP Morgan to Expand Mortgage Modificaton Program This article indicates that progress has been made in the problems associated with investors blocking modification of securitized mortgages and that JP Morgan is committing significant resources to a large scale mortgage modification program. If my own experience, as described in my most recent written communications with Wamu/JP Morgan Chase (provided below), is any indication, the good news has yet to trickle down to the bank reps with whom I've been dealing. Or maybe, the "good news" is just more disinformation and propaganda designed to dampen public outrage toward the banks. My own experience makes Acorn's direct street actions look ever more appealing even for a crippled, grumpy, old, reformed street fighter like myself. See Stop Foreclosures Now!
There are a number of very good reasons for loan modifications.
First, there are the macroeconomic considerations. If the first wave of foreclosures has yet to float your boat, then get ready for the deluge. With the millions of foreclosures that have occured and the millions more to come, I'm hardly the lone ranger in my attempts to renogiate the terms of my loan with my bank.8 Million More Foreclosures
Money manager Whitney Tilson describes the coming second wave of home foreclosures as follows:
We had the greatest asset bubble in history and now that bubble is bursting. The single biggest piece of the bubble is the U.S. mortgage market and we're probably about halfway through the unwinding and bursting of the bubble," Tilson explains. "It may seem like all the carnage out there, we must be almost finished. But there's still a lot of pain to come in terms of write-downs and losses that have yet to be recognized." Second Wave of Foreclosures
Just moments ago I watched Black Swan author, Nassim Taleb, shake his head sadly like a teacher at the head of a classroom of unruly students, as he was spitballed by CNBC stock market shills masquerading as journalists with frantically hopeful leading questions as to what signs to look for that would signal we've reached an economic bottom. We are at the beginning not the end of this crisis, he told them. Massive deleveraging, much of which emanates from securitized mortgages, is still ahead. For one glorious moment the spitballers appeared dumbstruck and the program moved to a commercial break.
At the scale of individual households and financial institutions, given the costs to lenders of foreclosures, averaging $60,000 a pop or as much as 30% of loan value by various estimates, Foreclosure Costs Explained, mortgage modifications in very many cases makes financial sense for the lenders. It makes sense even without financial incentives provided to the banks at the tax payers' expense. In my own case, I can afford and have offered to pay the bank 75% of what the increased payment will me come May. I have not, as the bank's representative claims, asked for a reduction in principal, but rather a reduction in the interest rate coupled with an increase in the period of amortization from twenty-five to forty years.
The following excerpts from some written exchanges with my bank are indicative of just how badly they are handling at least one attempt at a mortgage modification.
Dear Ms. A (Wamu/JP Morgan Chase's Loan Workout Specialist):
I am very disappointed to have been informed by you and your supervisor, Mr. C, on January 28, 2009 that my application for a loan modification to reduce the interest and extend the duration on my loan has been denied. Furthermore, this information was provided over the telephone and I have nothing in writing. Please correct this oversight.
The absurd incongruity between my circumstances, my offer of compromise and your counter-offer leads me to believe that I and, I assume, the investors are the victims of a failure of adequate scrutiny, understanding and fiduciary responsibility. I urge you to reconsider your actions in this matter. Toward that end I am providing a description and critique of the process to date.
I am now and have always been current on my payments. But when my loan resets in May 2009, my payments will increase to an unsustainable amount. As you know, I have been communicating with the Early Loss Mitigation Department since August 2008, some six months. Recently, I have had reason for optimism based on the bank’s direct written offer of assistance to me, its solicitation of an application for loan modification from me, as well as upon statements in the press that the problem of securitized loans had been solved and that JP Morgan Chase, a recipient of billions of dollars in public funds, was aggressively modifying loans.
However, your counter-offer, purported by you to have come from the investors, to temporarily reduce my payments for three months and then add the unpaid balance to my loan and increase the payments thereafter, utterly fails to address my circumstances as conveyed to you in my original application and subsequent communications. Based on my conversation with you and Mr. C I do not feel that you are familiar with the pertinent facts of my case and so have likely failed to discharge your moral obligation to me as tax payer and faithful customer of many years, or your legal obligation to the investors so that they might make a decision that best serves their financial interests.
In addition, your steadfast refusal to allow direct communication between borrowers and investors does not admit examination and evaluation of your conduct in this matter, nor does it allow the two parties with the most to win or lose to seek compromise in their own best interests.
I was further concerned by the inconsistencies in other statements made during our phone conversation. For example, your statement that my medical condition was not an issue contradicts numerous public statements in the press and your own application for loan modification. See, for example, question #9 on the Borrower Assistance Form, which specifically mentions “illness” as one of the difficulties about which “WaMu Cares”.
In addition, when I mentioned my offer in compromise (sent by e-mail on November 8, 2008 to your predecessor, Ms S., and forwarded to you on December 20th), Mr. C’s response was, “What offer?” I then described my offer and mentioned that it was modeled on those of Sheila Bair. Mr. Crowell then asked, “Who is Sheila Bair?” I informed him that she is the head of the FDIC, to which he responded that “we are not the FDIC.” I encouraged him to acquaint himself with the policy preferences of public officials such as Sheila Bair as he may, in the not too distant future, be answerable to such as her should the nationalization of his bank occur, a measure which I support.
I remarked that the present value of the bank’s loss in the event of foreclosure was likely to be significantly greater than the loss associated with my proposed modification. Mr. C responded with a statement to the effect that the bank, as servicer, would lose only its fees but that it was the investors who would suffer any substantial loss--- so much for fiduciary responsibility to the investors. I then informed him that I also have a home equity line of credit which Wamu still holds and stands to lose a significant amount but he remained stalwart in his refusal to reconsider the matter. I reminded Mr. Crowell that both my First Mortgage and my Heloc were non-recourse loans, thus limiting the bank’s and the investors’ recovery solely to the value of the house and putting my other assets and income legally out of reach. I also reminded him that, since the First Mortgage is senior to Heloc, his own institution would most certainly suffer a significant loss in the event of foreclosure. But again, he remained unmoved.
At one point he suggested I seek refinance. If he, as he should be, were aware of my loss of equity due to falling home values, and my previously provided financial details, he would know that refinancing my loan is not an option.
Since it is my belief that neither you, as representatives of the bank, nor the investors are acquainted with my loan modification proposal and since I believe it is also highly likely that you have failed to acquaint yourself with my financial details and other relevant circumstances I previously provided in my application and other communications, I will provide those subsequently as necessary.
In subsequent e-mails from Ms A, she repeatedly asks me what it is I want her to do, indicating that the matter was beyond her control; that it was the "INVESTORS" (her emphasis) that have made the decision. She continues to resolutely miss the point. That point being that she has failed, not as a decision-maker, but as a conveyor of accurate and truthful information. I have come to believe that her incompetence is the result of poor training and understaffing by the bank in the face of an immense volume of transactions. But that is no excuse, particlularly when one considers the billions in public monies this bank has received.
Dear Ms A: What I want from you and Mr. C is obviously something neither of you are empowered to provide. Therefore, I wish this matter and the statements below to be referred for reconsideration to someone more senior.
I want the investor to reconsider my application based on a more comprehensive statement of my circumstances than was orignially submitted. That initial, very short form was presented to me as a preliminary screening for the bank's use only. Crucial information as to the value of the property in question, and documentation as to my health issues, pertinent information according the the questionaire, were neither requested nor provided.
This revised application should be approved and certified as true and complete by both the bank and the borrower prior to being resubmitted to the investor. The bank should then act as intermediary for subsequent certified, written communications between the borrower and investor.
Furthermore, I hope you consider the serious avoidable damage being wrought by miscommunications in this matter. One would have thought, given all that has recently come to light, that the days of hasty, slap-dash deals based on false and inaccurate information were over. This is evidently not yet the case at Wamu/JP Morgan Chase. Consider, for example, Ms A's statement that the investor rejected my application for a loan modification based my request for a "reduction in principal" (a total misrepresentation of my request), casts grave doubts upon the accuracy of information conveyed from me to the investor by the bank.
What other crucial information might the bank have misrepresented or not provided to the investor? For example is the investor aware that California mortgages are non-recourse loans by law? Because non-recourse mortgages are a type of contract peculiar to certain states within the U.S., foreign or out-of state investors , for example, might not be aware of the losses they will incur as the result of a foreclosure. I hope you have informed the investor of this, because he may have looked at my other assets and incorrectly concluded he has claim upon them. This is a very important point and I suggest you look to it.
I have very little doubt this shadowed wall that is currently imposed between investors and borrowers, and that is an invitation to abuse and secrecy, will soon be breached by legal action and that folks like me will start showing up in court as witnesses supporting the claims of investors that they were provided incomplete and/or misleading information by the banks. I look forward to that day of sunny transperancy.
Since loan default appears to be inevitable at this point, I need to be referred to a representative of the bank that is both knowledgable and empowered to make legally binding decisions on the bank's behalf as regards agreements pursuant to short sales, deed-in-lieu of foreclosure and like options. Finally, I want the name and contact details of the bank's legal representative for the jurisdiction in which I live.