Denise L. Evans' Real Estate Advice

BofA Loan Modification Delays | December 21, 2011

I’m helping someone right now who’s been on  “hold” for over a year regarding a loan modification. They completed all requirements for the trial mod. They’ve made every payment exactly on time for almost 18 months.  Still  no permanent modification!  In fact, each new loan statement shows their delinquent balance getting larger, because the payments are less than the original payments. They’ve received multiple foreclosure notices! These poor people are completely stressed out, and it’s no wonder.

Their BofA contact told them final loan modification was delayed because FHA sued Bank of America and no loans could convert to permanent modification until the lawsuit was over.

WHAT A BUNCH OF _______________! (Fill in the word you want. As Colonel Potter on M*A*S*H used to say, “What a bunch of horse hockey.”)  There is no lawsuit by FHA against Bank of America. There is a lawsuit by FHFA (Federal Housing Finance Authority) against Bank of America and 17 others, but it is related the sale of bad loans to Fannie Mae and Freddie Mac.  It has nothing to do with loan modifications. If you would like to read the lawsuit, it is HERE.

I spent almost an entire day trying to get a straight answer. It isn’t easy, and I used to cross examine people in court for a living!

I still don’t have an answer. This is what I’ve been told:

• The problem is widespread, and there is an entire department at BofA dedicated to problems with “delayed conversions” (That’s the official name of this problem)
• No one knows how long it will take
• Until it is resolved, no information at all is being reported to the credit bureaus about the borrowers. In other words, even though they’ve made every payment on time, the credit bureau doesn’t know that, so their credit score has not had an opportunity to get better
• The problems are not the fault of the borrowers, nor are there any deficiencies in the borrrowers’ paperwork
• Miraculously (right at Christmas!) a manager I was talking to (okay, maybe I was grilling him) said he received an update on his computer last night! The update notice said the “audit” of the loan modification process was now complete, and BofA would begin manually processing all loan modifications in the pipeline and awaiting conversion to permanent modifications.  The notice did not say how long that would take.
• The telephone number of the BofA legal department is a closely guarded secret and even I cannot find it, and I’m really good at that sort of thing
• At least two managers in the chain of command on this issue have no assigned telephone numbers and cannot be reached. Another manager has a phone number but she never answers her phone and her voice mail box is full.
• My blood pressure has gone up 50 points since starting my phone calls, and if I have a stroke and die, my husband is going to sue BofA for my death!

HAMP regulations cover the “delayed conversion” situation. They say that when a lender learns about a delayed conversion problem, it must finalize the conversion as soon as possible, but no later than 60 days after learning about the problem. My reading of the regulations seems to indicate that if borrowers quit making their payments during the delayed conversion period, then when the loan modification becomes final, the lender must tack the principal portion of those payments on the end of the loan, and is not entitled to any interest during the delayed conversion period. DO NOT STOP MAKING YOUR PAYMENTS BASED ON THIS. IT’S JUST MY OPINION, AND I MIGHT BE WRONG!  TALK TO AN ATTORNEY BEFORE STOPPING YOUR PAYMENTS. Here is a link to a brochure that explains some of the loan conversion issues. Skip ahead to page 84, “Delayed Conversion.”  LINK

This is preposterous!  The borrowers I was trying to help are totally stressed out. They can’t even start rebuilding their credit while they are waiting!

Write and tell me your experiences or insights.  I’ll update this issue as I get more information, of if the borrowers hire a lawyer and file a class action lawsuit. If that happens, I’ll give you the name of the lawyer.