Banks Continue to Foreclose on Those Seeking Loan Modifications

December 20, 2010 No Comments »

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Banks still foreclosure on homeowners seeking loan modifications, according to a survey conducted by the National Association of Consumer Advocates (NACA).

The group, which surveyed 96 attorneys representing over 2,500 homeowners, found that nearly every one said they had a client whose bank tried to foreclose while they were negotiating a loan modification.

And half of the attorneys said they had represented more than 20 homeowners in that situation.

“Typically, foreclosures and modifications are processed at the same time in different parts of banks that often don’t talk to one another,” NACA stated in a release.

“This “dual track” became a hot topic this fall as the “robo-signing” scandal highlighted the degree to which banks automated the foreclosure process. In a congressional hearing in November, Bank of America and Chase both admitted to using this system and said it was actually an industry-wide practice.”

Apparently Fannie Mae is a big proponent of the “dual track” system, but the Treasury’s loan modification program (HAMP) has always barred banks and mortgage lenders from foreclosing on homeowners trying to complete loan modifications.

The attorneys also reported that loan servicers themselves often caused the foreclosures, while advocates claim banks’ poor accounting and inflated fees cause the foreclosures.

Half of the attorneys surveyed said homeowners landed into foreclosure due to improper fees (such as inspection fees or appraisal fees), misapplication of mortgage payments, and force-placed insurance (where the banks charge homeowners for expensive insurance).

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