Loan Modification Denied by GMAC due to Previous Refinance to Lower Rate

Unedited Question:

The property was purchased 09/29/08. When interest rates went down the loan was modified to take advantage of a lower interest rate on July 1, 2009, thru Gershman Mortage, the same mortgage company as the original and continued to be serviced by GMAC.

Due to the husbands unemployment, homewoners began to fall behind in October 2009. A mortgage Modification was applied at the request of GMAC on April 30. On May 17, the application was denied, after weeks of "providing additional documentation". If the modification of July 1, 2009 was a non-qualifying event, then GMAC knew that before they asked them to submit paperwork for a modification. They were "gaming" the system,

So the question is what is the definition of "loan origination date". All that was done was modify the interest rate on the original mortgage.

What probably happened is Gershman wanted to get new mortgage origination fees so it processed the modification as a new mortgage rather than a modification of the interest rate on an existing mortgage, all without disclosure that they were loosing the right to a later modification.

Mortgage Modification Answer:

Your question is a bit confusing. This is what I understand from the information you've shared:

1. July 2009 - First loan modification
2. October 2009 - Husband became unemployed and they started to default on the modified loan.
3. March 2010 - Homeowners applied for a new loan modification.
4. April 2010 - New loan modification application was denied because of previous modification in July 2009.

To answer your question on what is the true loan origination date, it is the date that the original loan became effective. It is the date specified in the promissory note.

My question to you is, was the July 2009 transaction a loan modification or was it a refinance. You alluded to both in your question above so I'm not sure which is it. Do you have proof that the lender charged loan origination fees? If so, then it may have been a refinance because such fees are not the norm for a loan modification.

Did the lender confirm why the April 2010 application was denied? You mentioned that it was because of the July 2009 modification/refinance. Is this what the lender said? This is the first time I've heard that a loan modification application was denied because they previously applied for one. Was July 2010 a HAMP modification? If so, their lender does not have to accept a re-application for HAMP. They will or will not accept at their own discretion.

However, if it were a traditional loan modification, it's perfectly well-known that homeowners can re-apply multiple times if they feel a need to do so.

You mentioned that the husband lost his employment. Could it be that the lender denied their application because of the drastic reduction of income? If the lender determines that the homeowners' incomes are not sufficient to afford any new modified rate and terms, they will not approve the application.

However, they may be eligible for a forbearance plan if their lender participates in the new practice of allowing homeowners who are unemployed to defer their payments for six months, allowing them time to find new jobs and get back on track. This might be a viable option for your homeowners.

Please feel free to post again if you have further questions.