The Ugly Truth behind Loan Modification Programs

You know those newsy little notes they print at the bottom of your mortgage statement? Here’s the one that suckered me in:

Experiencing difficulty keeping up with your mortgage payments? We’re here to help! Apply now for Home Affordable Mortgage Program (HAMP) through GMAC!

Wrong. They’re not there to help. Us, that is—people who put a down payment on a small house, try to make our mortgage payments on time every month, still have decent credit, and who are having a hard time surviving.

Loan modification is a process where your lender lowers your current mortgage by extending its term or lowering your interest rate. It’s a federal program begun by the Obama administration in 2009 to “help families keep their homes.” Three months ago I applied for a loan modification through my mortgage holder, GMAC (who is backed by the Federal Home Loan Mortgage Corporation, or “Freddie Mac.”) It starts with an invasive ten-page form and copies of every possible document relating to you and your home, income, expenditures, and taxes. A “counselor” then contacted me. I fully expected to qualify under the conditions the HAMP website clearly (but falsely) explained, and she said nothing to discourage me.

A month later I got a rejection letter. I tried to talk to my “counselor,” whom I’m now certain isn’t a real person, but a robot programmed to repeat the same empty phrase over and over: we have guidelines…we have guidelines…we have guidelines. As I had already explained in my (required) cover letter, I’m experiencing loss of income due to the economy, which I thought was the point. She said the reason I didn’t qualify was because I don’t make enough money. I said, like, duh. She told me to apply again when my income went up.

Since I’m self-employed, my income fluctuates. The next month was better and I applied again, making the three-month average they want to see rise. Another month went by, and I got the same rejection letter.

Again I tried to question my “counselor,” and again she repeated her mantra: we have to stick to government guidelines. She said it over and over.

Frustrated and angry, I called a non-profit agency specifically designed to help Arizona homeowners. The woman I spoke to began asking the basics—name, address, phone, income, payment amount, etc. The aha moment struck when she asked what I owe compared to the value of my house. I don’t really know the value of my house because you can’t actually sell a house in Arizona. Certainly way less than I paid for it. But houses have a book value regardless of real life, and it turns out I have equity in my house. She explained that because of this, I would never receive help and it wasn’t even worth it to continue the interview.

The lender can’t possibly know what my neighborhood is like or the condition of my house. They only know what their tables and charts tell them and they are absolutely rigid in abiding by their computer-generated decisions.

Here’s how it works. HAMP “helps” homeowners whose homes are worth up to $729,750 but who have not paid much in. The lenders don’t want to foreclose because they would lose too much money. But they don’t care if I foreclose because they can dump my house for what I owe and they won’t lose anything, even if it takes a few years. I am the one with the most to lose, not them. The agency explained that the program isn’t really about helping homeowners, and although it does help some homeowners it is only by default, not need. It’s all about the lenders getting their money. If they foreclose on an expensive home where they have loaned the homeowner a pile of cash, they lose big time. So they grant the loan modification because they want the homeowner to keep paying. They also seem to want to deal only with people who are already a couple months behind. My “counselor” actually said to me, “but you’re still paying your mortgage.” Well that’s just the kind of person I am, excuse me for being respectable. I would do anything to get that rent paid.

So the lender has no interest in modifying my loan. It’s not about helping people, it’s about their investment. If only they had explained this up front I wouldn’t have bothered. At no point during this debacle were they honest with me. Plus, it’s nearly impossible to get through the menus to a real person and I was put on hold so many times I blew through my cellphone minutes and got a huge bill. They peddle this program as if it’s all about goodwill. It is not. It was an infuriating waste of time.

In the end they raised my mortgage payment. I went to make on payment on my property taxes and was told they had been paid by GMAC. Then they paid my full year’s homeowners insurance. Granted I have to pay these anyway, but that’s not the point. They sent me a bill for a thousand dollars and told me to pay it now or my mortgage goes up, and so it did. They have every available corporate clone with a calculator working diligently to make sure THEY get paid.

So those big inflated shells of conspicuous consumption with the Audis in the driveway that people bought when they had jobs, the ones that are four times the size the owners need but felt they deserved luxury, the ones that cost a small fortune to heat and cool and maintain—they likely qualify. They might even think they’re getting “help.”

This has been a public service announcement.

21 responses to “The Ugly Truth behind Loan Modification Programs

  1. What makes me sick...

    Dum Dum believes that is what happened to our family home when my parents passed away and my sister shortly afterwards. Almost got foreclosed 4 times. I only think it didn’t ’cause of it’s ‘book value’, location, location, location and possibly a small amount of equity. This was 2005 though, can’t imagine going through that now. Take care Debra. 😉

    • Hi DD, Was this in the UK? Are there “federal” programs like this there?

      Here, the more money you owe and the more the lender has to lose, the more willing they are to find solutions. They don’t give a flying shit that you’re struggling, it’s not about that.

  2. The whole thing is a pile of bullshit, and you just proved it one more time. The advertisements should be blatantly punished as false advertising. The bank officials that caused the bubble to burst should be in jail. The government, the Obama (Time For A Change) administration, and the federal government itself, does not care about you in the least. All they will continue to do is protect the higher-earning tax paying base because, like I said yesterday in my post, it’s all about taxes. Their tax revenue. It’s never going to be about helping people.

    • Len, you said it. It’s bullshit pure and simple. The advertisements are bullshit, the program is bullshit. And I want people to know it’s bullshit.

      Many loan modification programs (HAMP isn’t the only one) actually REQUIRE that you are three months behind, and I can’t imagine letting that happen no matter what it takes. What DOES happen is other bills go unpaid, health issues are not addressed, the car doesn’t get fixed, the roof and the septic and the pipes don’t get repaired—but they don’t see that and they don’t care.

  3. When I read this post, the advertisement at the bottom was for Golden Plump chicken, which I found somehow appropriate to how many of us are starting to feel – like we are on our way to being plucked and cleaned for consumption!

    • Hi Harry, if only my mortgage company advertised for businesses—they don’t, it’s all about “with interests rates this low, get your second home now through GMAC!” and crap like that. I wish I never heard of HAMP.

  4. Good heavens Darlin – I can’t decide if you’re the cowgirl or the Indian in all that. I guess you must be the cowgirl and they forgot to tell you that the game is actually called “cowboys & Indians” – no mention of cowgirls in the game – unless of course you bring a lot of money to the game – then they might let you play but you need to have the right arrows – and all that said – – – you may just be S.O.L.

    Try to hold out for the troops………….

  5. What makes me sick...

    Actually, it was in New Jersey, but I had come back to live in the UK in ’95. Don’t have a mortgage over here, but is a bit similar and lots of people have had their homes repo’ed. I could have taken over the property in 2006, along with mortgage arrears, back property taxes, unpaid utility and hospital bills etc.. Jesus, that would have been a real hoot! I honestly wouldn’t want a mortgage over here. It’s shit. Incidentally, Dum Dum had car finance with GMAC a long time ago. These companies are like metastatic, malignant tumours, involved in everything, sucking the very life out of people who just simply can’t deal with it. Speaking of corporate injustice, Debra, have you heard of a company called Unum? They are a parent company of a company called ATOS, that is causing A LOT of discontent over here. Dum Dum is currently involved in a couple of online campaigns to get these bastards out of the rectums of our DWP (Department for Work and Pensions), The DWP does not need any ‘help’ being evil. The situation is like Mugabe sub-contracting to Gaddafi (now he’s out of a job). Lot’s of fear and loathing against ATOS, and Unum has denied any wrongdoing in the US. We beg to differ, but if you know anything, that would be cool if you could pass it to me. Take care again! 😉

    • Dum Dum, no, I’ve never heard of Unum until I just looked it up. I’ve never had anything to do with getting any kind of benefits so it escaped me. It looks monstrous and with that comes corruption, lack of communication, compartmentalizing, and the absolute impossibility of an outsider having a human conversation with anyone who can help you.

      Metastatic is a perfect word to describe GMAC and all their evil kin. That one phone call I made was like a disease that spread. They are still sending me piles of mail every day which I have stopped opening. It’s all just more torment.

      Please write about your experiences with DWP so we can better understand what’s happening. I for one am clueless about these issues.

  6. What makes me sick...

    Sure will. Unfortunately, I know more about the DWP than some people who have lived here all their lives. But that’s because if it affects me in any way, I make it my business to know. I’ll be posting on my blog in 24-48hrs and I’d be real interested in your opinion, having read the review by Kay Camden in your post ‘Editor for Hire’!

  7. If you can find an article maybe a week or ago in the new york post by John CRUDELE he explains how gov. pays bank on these loan modification deals.

  8. Thanks for educating us all. I had no idea that the program was really meant to help the banks and not the taxpayers or citizens. Can’t figure out where the tentacles of corporate America have not reached, but I’m sure there is someplace.

    With that thought I’m heading out to the deep woods to, for a couple of hours, escape the grasp of US corporate greed.

    It is time for big changes in our political structure.

    • Hi Bill, the program is so dishonest in its advertising it’s shocking. Now that I’ve been put through this, I’m finding hundreds of thousands of articles regarding “the ugly truth,” whereas previously I was only looking for information on how to apply. This is corporate greed backed by the government under the guise of compassion. This has been one more depressing learning experience and I’ve learned to expect no less, and the changes needed to occur in America (and all over the world) may have become an impossibility to repair. I’m sorry to sound so cynical, but such are the experiences of my life.

      Thinking of you and my friends back home, and hoping you escape Irene. We are having a powerful monsoon—huge storms lasting much longer than in previous years. We lose electricity almost every day. I’ve heard people say it’s related to major weather patterns and I wonder if the two are related.


    This is the same story for everyone who got deceived and wanted to get a home modification. The truth is this program has been designed and implemented by government and financial institutions to get richer, but they make it look like they are really going to help people with hardship.
    Every guideline is designed to keep investor’s benefit like NPV (net present value) which only works as a filter to give banks the power to reject loan modification if it is not beneficial for them—NOT FOR HOME OWNERS.
    My case is exactly like that, the first time rejected because of income! and second time because of NPV and their explanation is “modifying your loan is not beneficial for bank compared with your foreclosure.”
    It is so sad in this country that with our motto regarding humanitarian help for people (all over the world) they are not for people in this country who are working and helping turning the wheel of the country.

    • Thank you Disqualified, for writing with your story. If only they were honest up front they would save many people from putting themselves through the hell of applying only to get rejected. It’s a big lie. Good luck.

  10. I stumbled onto this blog, and it sounds a lot like what I went through in 2008 when my ex-husband and I were divorcing. We were still current on our mortgage, and I called the loan company and told them we were divorcing and couldn’t sell the house for what we owed on it, per the realtors I had consulted, and that neither of us could afford the current mortgage payment on our own. I told them I could afford about half on my own, and asked if there was anything they could do to work with me. The lady told me that they don’t accept partial payments, and they had a credit counseling department, but they wouldn’t talk to me until we were 3 months late. So, we had no choice but to walk away, and the house was foreclosed the following year. This was before all the loan modification programs, which sound like a federal government extension of my interactions with the loan company itself. Based on my experience owning my first home, I never want to own again. It has definitely scarred me, and countless others, very deeply, and I’ll be happy to rent for the rest of my days. I wish you luck with your situation.

    • Hi JMP, thanks for sharing your story. Even with the loan modification programs of today, they probably wouldn’t help you because you were current on your payments. I too asked about partial payments, and they told me they would bounce them. They also suggested credit counseling, which is ridiculous when it’s hardly a matter of curbing your nonexistent shopping habit. Credit cards are for emergencies, not the mall, and emergencies are never cheap. In fact, it’s infuriating that it’s automatically assumed that your financial problems are self-caused by frivolous spending. As if.

      (The only reason I have always wanted to own my own home is because of my pets—most rentals today do not allow them. Irresponsible pet owners have caused this.)

      If you search online for advice on dealing with loss of income (for whatever reason), most articles advise you to contact your creditors immediately to work out a plan. They are quite uninformed, as I have found both credit card and mortgage companies to be absolutely uncompromising no matter what their websites say. They pile on the late fees and up your interest rate the minute they suspect trouble. It’s no wonder people simply stop paying as their burdens become insurmountable, and find that a lifetime of good credit is actually punished, not rewarded, when bad times hit.

  11. My spouse and I stumbled over here from a different
    website and thought I should check things out. I like what I see so i am just following
    you. Look forward to going over your web page yet again.

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