Applied for HAMP and ASC Offered In House Loan Modification Option

by Shawn

I have Americas Servicing Company (a division of Wells Fargo) and submitted request for a loan modification under HAMP using the forms from MakingHomeAffordable.gov.

What I got back was a Modification that is more like a bandaid than a real solution. The offer states I have5 days to respond with the offer signed.

Here is my situation:

Monthly Income Gross: 2300.00 Net:1600.00
Monthly bills/expenses: 825.00 (VERY Bare essentials)

Recent appraised value of Home: 160,000 (was 185-200k a year ago)
Current Loan amount $175,000 with 18,000 behind.
Current Interest rate 7.5%
30 yr fixed
Monthly payment: $1418.89

Their mod offer:
Loan amount 190,000
Interest 4%
34 yr fixed
Monthly payment 1106.55

When I called them and asked if there was any way to make this lower so I wouldnt be setting myself up to fail 6 months later they responded:
You were denied for HAMP and this is the final offer available.

I was told by phone interview I was pre approved for HAMP when I contacted them and provided income/expense info during interview, now I feel I have been led on for the last 3 months making the trial payments of 775.10 on time while they "reviewed my application" only to offer an in house band aid solution.

Any suggestions or advice PLEASE?

Mortgage Loan Modification Answer:

Unfortunately, what you experienced from your lender is not uncommon. From the information you shared, it looks like your approved modified rate of 4% is fixed for the duration of your new loan term of 34 years, and will not step up to a higher rate after a certain amount of time (typically 3-5 years). So in that regard, it was good.

However, since the lender determined that your loan is not eligible for HAMP, they did not reduce your payments down to 31% of your gross income, which would have been approx $713.00, and definitely much more affordable. Did you ask them why you were denied for HAMP? It looks like they gave you a traditional loan modification based on their own guidelines (which no bank, as far as know, has ever disclosed the way they decide the rates and terms given for traditional loan mods).

My loan modification for my first mortgage with CitiMortgage was similar to yours. They capitalized (added to the principal balance) my arrearages and gave me a lower rate that lowered my monthly payments by a little bit, leaving my monthly payments still at unaffordable levels. The only difference is that my rate will step up after 3 years and I didn't have to go on trial payments. CitiMortgage also told me to take it or leave it and that it was a final offer and that I was to sign and send back to them within 7 days. They wouldn't let me re-negotiate with the underwriter to change the terms prior to signing. So I accepted the modification with the intent to re-apply in a few months when I can demonstrate that my modified payments are still unaffordable.

By the way, I have a second mortgage that was modified by Wells Fargo at 1% fixed for 40 yrs, so it makes up for the crappy rate and terms I got from CitiMortgage for my first mortgage.

Many people have re-applied to re-modify their loans, and have been successful. I was just talking to another homeowner from my daughter's school who re-applied and got better rates and terms the second time around. So it does happen.

It's up to you if you want to accept your bank's offer and sign the modification agreement they've offered, and then re-apply down the road. If you turn it down, there's no guarantee that the same terms would still be available beyond the expiration date of the bank's offer.

Of course we'd never know if you would've gotten better rate and terms if a third party negotiated the loan modification on your behalf, but I don't blame you for doing it on your own after having been let down by the two loan modification companies you hired.

Is there any way at all that you can increase your income? A combination of a reduction of your monthly mortgage payments and an increase in your income would help you afford your monthly obligations and then some. See the Debt Freedom page on my website for what I did to do just that.

Hope the above helps. Good luck and all the best to you.