After losing one of her part-time jobs in the fall, Indiana law
student Melissa Stuart applied for a mortgage modification in hopes of
reducing her monthly payment. Her servicer, GMAC, deemed her eligible
and put her in a trial modification under the Obama administration’s
Home Affordable Modification Program. She said her monthly payment
shrank to $874 from $1,108 — a huge relief.
“I would have had to live off my credit card,” said Stuart, 28.
“Two-hundred bucks doesn’t sound like a lot but I had a premium
increase on my health insurance… I went from $180 to $219.”
To keep people in their homes, HAMP gives servicers cash incentives to
modify mortgage terms. Borrowers who meet eligibility requirements are
put in trial modifications that typically last three months (Stuart’s
was for four), and if they make their payments the modification is
supposed to become permanent. But GMAC called Stuart with bad news in
February.
“I assumed I would be getting a call or some kind of notice of my
permanent modification — but it was GMAC collections. ‘You owe us
$4,000. When can you pay?’ I explained to them I was in the Making
Home Affordable Program. They said, ‘No, you were kicked out of that
program in January.’”
A couple weeks later, Stuart received notice that if she didn’t pay
outstanding charges and fees within 30 days, the foreclosure process
would begin.
“I had a panic attack for like 30 minutes,” she said. “I pride myself
on being really responsible… I was hyperventilating and just, ‘Oh
shit, what am I going to do? Now it’s getting serious. This is beyond
my control.’”
Servicers participating in HAMP are allowed to move forward with the
foreclosure process (but not to foreclose) while a borrower is in a
trial modification, a cause of much confusion to homeowners. Under
HAMP, servicers generally report homeowners in trial mods as
delinquent for credit-reporting purposes.
“There are confused borrowers all over the country,” said Julia Gordon senior policy counsel for the Center for Responsible Lending. “On the one hand they think they’re in the middle
of getting a HAMP mod, and then they get this notice… Basically you
get these legalese things saying, ‘We’re setting up foreclosure.’”
“It really demonstrates that the servicing industry really needs
serious regulation,” said Gordon.
Stuart had extra cause for concern because she’d been told that she
had been kicked out of HAMP. That seems to have happened because she
set her automatic payments too early — instead of on the first day of
the month, Stuart set her bank account to make the payment
automatically on the 25th of the previous month. She was concerned
that GMAC wouldn’t accept the money on Jan. 1, New Year’s Day.
It was intuitive to Stuart, but GMAC, apparently, didn’t appreciate
the early payment. Stuart said that whenever she called GMAC for an
explanation, she was told that payments had to be made on the first of
the month, no sooner.
In addition to calling GMAC, Stuart said she reached out to one of her
senators, to the special investigator for the TARP bailout program and
to Fannie Mae. Everyone replied to say something along the lines of
they were “looking into the matter.”
Finally, on Wednesday, Stuart received word from GMAC that she would
be given a permanent modification after all. Never mind about that
foreclosure.
In a statement to HuffPost, GMAC said it has modified its servicing
practices to avoid the type of problem that Stuart had: “With
permission of [Fannie Mae] as administrator of HAMP, GMAC updated the
trial agreement to reflect that trial payments must be paid on the due
date or within five days thereafter. This revised language is included
in all trial agreements offered by GMAC as of December 16, 2009.”
Also, GMAC said it has “implemented technology in January 2010 to
identify HAMP-eligible accounts subject to these certain investor
guidelines. The enhancements better ensure that any trial payment made
early will not be applied before the specified due date.”
“GMAC is committed to preserving homeownership wherever possible, and
we believe that we have reached an agreeable solution for Ms. Stuart.”
Stuart is glad GMAC said she could have a permanent modification, but
she’s waiting to see the paperwork. She heard about the decision in a
voicemail from a GMAC executive, which she shared with HuffPost:
“I had gotten a request through our corporate communications office to
take a look at your file,” said the executive. “We have been able to
get approval to go ahead and use the trial modification you have
already completed as your evidence to commit to repayment of the
mortgage. We are going to move this loan now into the permanent
modification phase.”
“I’m no different from one of a million different homeowners,” said
Stuart. “It’s very frustrating when you have to go to these lengths
just to get something resolved.”
