Mortgage Modifications Causing Plenty of Lawsuits

These programs and ideas to help reduce the number of foreclosures and help may seem like a good thing, but for some homeowners, they have become little more than a nightmare. Nobody knows this better than Anthony and April Soper.

This couple found themselves in trouble with their mortgage loan. They were paying $4,000 a month on their mortgage payment and they were having a hard time doing it. As a result, Bank of America, their mortgage provider, offered to put them on a trial program with HAMP. This sounded like a great idea at first. The couple could reduce their mortgage payment from $4,000 a month down to about $3,100 a month and get their finances back on track. They did everything they were asked to do under this program – they made their payments on time and everything else. But for reasons unbeknownst to them, they were not approved for the permanent modification on their mortgage loan.

That’s not the worst of it, though. Since they were not approved to be put on the permanent modification, the Sopers were now more than $8,000 behind on their mortgage payments. When they began the trial program, they were current on their mortgage. Their respective credit scores have dropped by about 100 points as a result of this and they have been threatened with foreclosure. The Sopers have filed a lawsuit against Bank of America because, as they say, the bank is to blame for the mess they are now in.

But the Sopers are not alone. There are efforts underway to find other homeowners who have found themselves in a similar situation with Bank of America. A federal judge is going to hear the case and consider joining the Sopers’ case with several others who have filed complaints against Bank of America in relation to the trial HAMP program. Bank of America isn’t the only bank that has found itself in this type of trouble, though. In fact, Wells Fargo and JPMorgan Chase have also had lawsuits filed against them for similar situations.

The growing number of lawsuits is not a good sign for the HAMP program or any other program that is being put into effect by the federal government. This particular program launched about 18 months ago and has only approved about one-third of the number of homeowners for permanent modifications. This is well below the goal it had when it first started out and these lawsuits are not going to instill the necessary confidence in troubled homeowners that is needed to take advantage of these types of programs.

Are these federal programs creating more trouble than they are worth? Or are the low numbers enough to justify putting them into action?