Mortgage servicers are still wrecking lives
Eva Paz and her husband, Francisco, had lived in their three-bedroom home in Modesto, California, for more than 20 years when the year-long nightmare began.
Money had sometimes been tight, but Paz says the couple worked hard to keep their mortgage and credit in good shape. Eva, 64, works as a teacher’s aide while Francisco, 66, is a school custodian.
To help pay their $2,100 monthly mortgage, they rented out a bedroom.
However, when a tenant refused to pay, Paz says, they found themselves running short.
So, they applied for a loan modification with their mortgage servicer, IndyMac Mortgage Services. Several anxious months later, they were granted a trial modification with a new payment of only $762 a month.
After diligently making their new payments through spring and early summer of 2013, the Pazes received a letter from IndyMac, a division of OneWest Bank, that their modification had been approved. They also were informed their loan was being transferred to a new servicer, Ocwen Loan Servicing.
The worst part of their home loan nightmare was about to begin, as the Pazes became two of the thousands of Americans who have struggled with unresponsive or negligent mortgage servicers. Housing advocates say those problems haven’t stopped, despite government efforts to crack down on mortgage servicer abuses.
Ocwen, ranked among the worst servicers for customer satisfaction by J.D. Power, refused to recognize their loan modification.
When Eva called, she was told Ocwen hadn’t received the documentation from IndyMac. IndyMac said that wasn’t the case.
Eva says she sent Ocwen copies of the letters she had received from OneWest. She kept calling. She faxed more documents. None of it seemed to matter. Her letters seemed to fall into a black hole. Her calls weren’t returned.
Suddenly, she found her home had been scheduled for a foreclosure auction.
"It was awful. How could these people just let my property go without even telling me?" Paz says. "I faxed them. I sent Ocwen a copy of all the letters I had gotten. I called. I wrote: 'You need to do something about this sale. You need to stop it. You only have days to stop it.' And nobody ever responded."
New servicer rules haven't stopped abuse
Consumers' mortgage complaints
|Problem||Percentage of complaints|
|Loan modifications, collections or foreclosures||56%|
|Applying for the loan||8%|
|Signing the agreement||4%|
|Receiving a credit offer||2%|
The Pazes' situation is hardly unique.
A report earlier this year by the Consumer Financial Protection Bureau found abuse continuing within the servicing industry despite government reform efforts following last decade's real estate collapse.
"Problems in mortgage servicing have plagued consumers for years and helped contribute to the financial crisis," said CFPB Director Richard Cordray.
Though the CFPB regulates credit card issuers, student lenders and other financial institutions, the bureau reported that the largest share of public complaints it has received has been about mortgages. From July 2011 to June 2014, they accounted for 34% of all complaints the agency received — more than 158,000 in total.
Early this year, the bureau issued rules that were supposed to clean up the industry — requiring servicers to maintain accurate records, establish a single-point of contact for borrowers, promptly credit payments and correct errors on request.
However, Lisa Sitkin, the managing attorney for Housing and Economic Rights Advocates, a California nonprofit mortgage counseling agency, says she has seen little change.
The rules may have given agencies such as hers "more tools to use to hold servicers accountable," she says, "but I have to say there is no shortage of problems and errors and possible violations that we still see pretty constantly."
Among the abuses that consumer groups have documented:
- Loan payments being misapplied or lost.
- Illegal fees.
- Escrow account foul-ups, including failures to pay taxes or insurance.
- Lost documents.
- Dual tracking, in which a servicer is working to foreclose at the same time it is supposedly helping the owner modify his or her mortgage — an approach now against CFPB rules.
- Rushed or illegal foreclosures.
More horror stories
In May, a study by the California Reinvestment Coalition, a nonprofit group that works for fair and equal financial services for low-income communities, documented the human cost behind that list.
The personal stories in the study Chasm Between Words and Deeds include:
— That of Carlos and Mary Castillo, who made all their payments on time after having a loan modification approved by Bank of America, only to learn their new mortgage servicer, Nationstar, had sold their home into foreclosure anyway, and they had three days to leave.
Housing and Economic Rights Advocates was able to get Nationstar to cancel the foreclosure and help the Castillos sign new loan modification documents. But a month after signing the new agreement, the Castillos arrived home to find a foreclosure notice on their front door.
Once again, HERA stepped in to halt the sale. Still, their next monthly statement from Nationstar included $1,339.91 in legal fees for the wrongful foreclosure. The servicer eventually agreed to remove the fee.
— The three-year battle by Sheetal and Varsha Sharma and their mother, Snehlata, to get two different mortgage servicers, EMC and Chase, to recognize they had been left a home through trust by their father and husband before he died of an illness.
The family faced foreclosure threats, was charged service fees and ran up legal bills, all in an effort to get the loan servicers to recognize their title to the home, provide them accurate information and act on documentation they submitted.
At one point, the Sharmas submitted loan modification documents six times in response to repeated requests. In December 2013, Chase was still sending letters addressed to their deceased father, and the situation remained unresolved early this year.
— The failure of Wells Fargo to respond to repeated calls and voice mails left by Gemma and Cornelio Jaochico when they were checking on the status of their application for a loan modification, which they believed was on track.
Instead, the Jaochicos say, their home was sold in foreclosure without advance notice. They found out when a real estate agent notified them nearly a month after the sale.
Wells Fargo claimed it had sent them a notice, along with other letters the Jaochicos say they never received. Wells Fargo also said it didn’t have documents the Jaochicos had faxed them.
Although HERA was able to halt the eviction, Wells Fargo refused to modify the loan. Desperate to hold on to their home, the Jaochicos turned to family members for help and were able to raise enough money that they offered to pay the full amount they were in arrears.
Wells Fargo refused.
"Without any real choices, we agreed to move out of our home by February 28, 2014," the family’s signed affidavit concluded.
Where to go for help
Sitkin says one of the most frustrating parts of HERA’s work is how little interest mortgage servicers seem to have in fixing even their most glaring mistakes.
"The reality is," she says, "that week after week, we contact the servicers about errors that have been made, and it takes so much time and effort for things that someone should just look at and say, 'Wow, we did that wrong, and we’ll fix that.' But that doesn’t happen."
Still, it’s essential that homeowners who feel they’re being treated unfairly by their loan get in touch with a group like HERA, says Kevin Stein, associate director of the California Reinvestment Coalition.
"We suggest one main step, which is to contact a nonprofit, HUD [Department of Housing and Urban Development] approved counseling agency or legal service office," he says.
"These people haven’t been dealing with just one situation; unfortunately, they’ve been dealing with many cases," he continues. "They know the rules and may have contacts within the mortgage provider."
How the Pazes fared
In the case of the Pazes, HERA appears to have helped them hold onto their home. The group assisted the family as they worked out a loan modification with Ocwen, Sitkin says, although they are waiting for final approval on the documents.
Before that happened, however, the Pazes' home actually went up for sale but didn’t fetch an immediate buyer. A judge later halted the sale.
Still, Eva says, "They were telling me eviction, eviction ... I thought, 'No, this can’t be happening.'"
There are signs the public has decided enough is enough.
Homeowner Phillip Linza had waged a three-year battle to block foreclosure by mortgage servicer PHH Corp. when a California jury ruled on his case this July.
After Linza got a loan modification in 2011, according to press reports, PHH began sending letters demanding a different amount for his mortgage every month. Despite repeated requests by Linza, PHH refused to clarify what his payments should be.
It was later determined a $616 shortfall in his escrow account caused a computer to generate letters demanding random amounts.
The jury ruled in Linza’s failure and awarded him $514,000 in damages — and an additional $15.7 million in punitive damages from PHH.