“We’re Irishmen, we’re gonna stand up to ‘em and fight”, says Ron Beck, sitting in our office with his wife Cherene. They’ve come to us for help with their fight with Wells Fargo, who they say tried to trap them into a predatory “loan modification.” Their story is enraging.
But first, what is a “loan modification?” Well, a loan modification is quite simply an alteration to a mortgage loan agreement. They’ve been a part of US lending policy for a long time, but they recently came into common use in the 2007 mortgage crisis. The intentions were noble: millions of people were losing their homes to foreclosure, so Congress passed laws like the HAMP program to encourage banks to allow homeowners to readjust the terms of their loans and stay afloat. But as we know, the road to ruin is paved with good intentions. While loan modifications can stave off the threat of foreclosure for some homeowners, we’ve seen now that banks have been using loan modifications as a way to trap people into horrible contracts.
Take Ron and Cherene. Their story is unfortunately all too common. You see, Ron and Cherene had been in their home faithfully paying their mortgage for 16 years. Ron ran a successful cabinet company, so their income was more than enough to stay current on the home. But sometimes life gets in the way. Their business was hit hard by the recession. So they tightened their belts to make ends meet.
“We took every bit of our daughter’s college fund, and then we were just living on a shoestring budget.,” says Cherene. “And then our daughter got sick, and it just spiraled downhill. We weren’t paying ourselves, we were just keeping the lights on.”
Ron told us, “That’s where we got behind on the payments, because if it’s between my child and the house, she’s gonna come first every time.”
So, Ron and Cherene missed two months of payments on their house. On the third month, they tried to start paying again, but Wells Fargo refused.
“They sent the check back. That’s what infuriated me, more than anything, is that we weren’t that far behind. We were only two months behind, and I had all these side jobs I’d been working to get caught up, and in the third month I was able to send in a check. But they sent it back.”
That’s when Wells Fargo started them on a months long bureaucratic goose chase that would give Kafka a migraine. The bank refused to take the Becks’ payments for months, causing the Becks to fall even further behind, thus making them candidates for a loan modification that would add another 20 years to their mortgage. Ron struggled to navigate Wells Fargo’s labyrinth of customer service.
“They stretched us out so long. There was a house note that we were continually getting, constantly. And they kept billing the interest up on it. And we said to the Wells Fargo rep handling our account, why are we getting these notes?” And he said, “Disregard that, don’t pay any attention. Once the modification is signed, you won’t be seeing these anymore.” We were still racking up interest, but he said to disregard it because we were in this trial period.”
Then the bank started accepting the Beck’s payments again, but diverted them to a “suspended account,” without telling the Becks for months.
“They weren’t even applying none of our payments to the account, so all that money that we gave them, where did it go? Where is the money that we’ve been paying on this?”
Cherene adds, “And why were we not told that, by the people that were handling us from day one, why did they not tell us what was going on?”
Ron: “And not even mention to us that we had the option to get caught up, it was like they were forcing us into this modification, they were saying it was the modification or nothing, from the get-go.”
Wells Fargo stalled and stalled and made the Becks sit on hold and sift through red tape for months until they had leverage over the home. Then they finally asked the Becks to come in and sign the loan modification.
“So I went to their office, and the girl that came in, another Wells Fargo rep, she let us know the truth. Bless her heart, she just sat back and she said, “This is ridiculous. I’ve never seen anything like this. “Something ain’t right here.” So I pushed the contract back to her and I said “ I’m not signing this, y’all do what you got to do. Take it into foreclosure, just do what you gotta do, cause I’m not doing this.”
The contract was patently ridiculous. The modification was structured so that an that an additional 26 years was added to the mortgage, with a meager $20 reduction in monthly payments. It was basically a whole new mortgage. They would have been 90 and still in that home.
The Becks had a tough choice. They weren’t about to sign their life away, so foreclosure was imminent. That’s when they decided to call our office. Our Big State agent, Maemar, took on their case, and in days they had sold their home and avoided foreclosure.
We were able to help make their situation a little bit easier. They avoided a contract that would have been completely devastating. But one thing we can’t bring them is justice. There’s no sign that there are going to be any significant shifts in these types of practices.
“We’re not seeing any changes in servicer behavior,” says Megan Faux, director of the foreclosure prevention project at South Brooklyn Legal Services, a legal aid firm that represents poor people confronting foreclosure in New York City. “We’re still seeing huge delays, improper denials of modification, very few principal reductions. None of their practices are really changing.”
“After all these situations, it’s really hard to sit down and trust someone.,” says Cherene.
It’s not just Wells Fargo. Across the industry, banks have been getting away with usury and unfair lending. Ron and Cherene’s story is happening all across America. Legislation that was meant to give people going into foreclosure relief has been used by banks to game the system and force people to sign their life away. This needs to change. Loan modification practices are in need of some serious reform.