Your sick child means nothing to your mortgage lender.
Not even if he dies.
You've drained your life savings. Pay me.
You've gone deep into debt. Pay me.
You've buried your boy. Pay me.
Your tragedy is an "insufficient hardship."
What happened to Noel and Debra Lesley is the biggest horror story I've seen to come out of the real estate mess of the last few years.
But were it not for the death of their son, Brad, the family's situation would be just another sad example of how screwed up the home loan business really is.
Instead, their story shows something more. The lenders and the companies that service loans lack a basic moral compass. They appear incapable of doing the right thing.
Refinancing, then illness
In 1998, the Lesleys bought their Orange County, Calif., home. In 2006, they refinanced on the basis that the property was worth about $400,000.
They did the refi with a 3/1 adjustable-rate mortgage from Countrywide Financial, the reckless subprime lender later bought by Bank of America.
Two years later, Brad fell gravely ill after being diagnosed with cancer.
Insurance wouldn't cover the cost of treatments, so Noel and Debra drained their savings and maxed out their credit cards to pay the medical bills.
And then their 17-year-old son died of heart failure attributed to his cancer.
Loan modification denied
Grieving and saddled with debt, the value of the couple's home also had plummeted to about $200,000, leaving them unable to refinance, according to the couple’s attorney, Anthony G. Graham.
So, they asked for a loan modification in 2008, knowing the payments would balloon in 2009 when the loan was scheduled to reset at a much higher 8.05% interest rate.
They sought no principal reduction but were looking for a fixed-rate loan of 3%, which would have reduced their monthly payments by about $750.
“They’re not moochers," Graham says. "They want to pay the full balance on the loan,” which is about $350,000.
In May 2009, Litton Loan Servicing, which serviced the Lesleys' loan on behalf of Bank of America, denied the request, writing in a letter that the death of a child was not a "sufficient hardship," according to a lawsuit filed in Orange County.
That Lesleys' lawsuit outlined several allegations, including breach of contract. The suit argued the only "justification" for Litton and the other defendants to deny the modification was "to cause as much emotional pain … as possible."
Unbelievably, the lender and its paper-pushers absolutely failed to show "basic humanity," the lawsuit alleged.
“I wish I could say any of this surprises me a little bit, but the fact is, none of it surprises me," says Ira Rheingold, executive director of the National Association of Consumer Advocates.
But, Rheingold says, “The callousness of it is breathtaking. Absolutely breathtaking.”
Lender fails again
|Bank of America||134,700|
|GMAC Mortgage||41,600||Source: Propublica.org, June 2012|
Unfortunately, the torment doesn’t end there.
After Noel and Debra sued, they fell further down the awful rabbit hole that is the loan modification process.
And this is where the story starts to look familiar to anyone who has tried to get the terms of their loan changed.
The lawsuit did what the Lesleys' initial plea for help didn't: It got the lender's attention.
In June 2009, all parties agreed to put the lawsuit on hold in an attempt to reach an agreement.
The couple filed the required paperwork as part of the modification request. Then they were asked to file again.
They didn’t get the modification offer until February 2011, when they were told by Bank of America they would be granted a modification if they made three trial payments, which would be held in a trust.
The Lesleys did so. And heard nothing until January 2012 when Bank of America sold their loan to Ocwen Financial Corp., a firm that specializes in servicing "high-risk loans."
I should note here that Ocwen also owns Litton.
This is important because in March, Ocwen rejected the loan modification, claiming the Lesleys failed to make trial payments — payments Litton had already said it had received.
In fact, the Lesleys made timely trial loan payments for eight months last year.
And yet, through pure incompetence, the Lesleys have incurred $72,000 in penalties and fees.
The Lesleys’ credit was wrecked after the loan was reported to credit reporting agencies as in default. Their credit score dropped from 720 to just above 500.
And so they sued again this year, arguing that Bank of America (which has since been dismissed from the lawsuit), Litton and Ocwen breached their contract to modify the loan and have intentionally inflicted emotional distress.
“What more can they put this poor family through?” Rheingold asks. “The family’s done everything they were supposed to do, and the servicer just keeps screwing up because they can.”
Ocwen Financial did not respond to a request for comment.
I did talk to Bank of America. A spokesman declined comment other than to remind me that the bank no longer holds the loan and therefore is no longer part of the lawsuit.
I can only hope Ocwen is shamed into settling this mess, but that would mean it has to find some of that "basic humanity" the defendants in this case are sorely lacking.
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