When my wife and I were laid off in April, we took many steps to control cost, including requesting a loan modification from our bank. For sake of anonymity, let’s just call them “Big Fucking Bank”, or BFB for short. One of the nation’s primary lenders, they are among the ‘best of the worst’ for processing loan modification requests; in other words, they approve more than the 6% to 8% granted by other large financial institutions.
For those of you fortunate enough to be employed or own your house outright, perhaps I should explain a bit about loan modifications first. When your financial situation undergoes a dramatic change (such as the loss of two incomes), you can request a hardship loan modification with your mortgage lender. Effectively, you’re stating that you WANT to keep paying your mortgage, but need some relief to reduce your monthly expenditure. Banks can agree to lower the interest rate of your loan, or (I believe) extend the terms. Certain criteria must be met (you can’t request a loan modification on a jumbo mortgage, for example) and you must provide a wealth of information including bank records and tax statements for several years.
Mortgage lenders are especially willing to engage in dialogue when you’ve missed or delayed mortgage payments. This, of course, has an immediate impact on your credit rating, which is used to determine everything from loan eligibility to insurance cost to employability. In short, a bad credit rating is to be avoided at all costs.
Fast forward to my situation. Having put as much into savings as possible over the past few years, my wife and I had a buffer to offset our loss of income. In July, we finally completed and submitted the necessary paperwork to request a loan modification from our lender. We were advised that, due to a large volume of requests, processing would take thirty to sixty days. We waited patiently for sixty days, calling only for the occasional update that typically ended with, “Yes, your paperwork is in our system but hasn’t been reviewed yet.”
And now the games have begun. Per our lender, our release of information is out of date, as are our bank statements. It should be an easy matter of pulling a new form down from the website and filling in our information, right? Sorry, wrong answer. BFB no longer hosts the form on their website, but you can request one be mailed to you.
We tried, without success, to fax the revised package to BFB last night. Guess what? You can only do so between the hours of 7 and 7. Presumably, this is done to prevent borrower’s personal information from sitting around on an untended fax machine. The cynic in me thinks it’s just one more obstacle presented by BFB in hopes you’ll give up on your efforts.
We were also advised by an agent of BFB that, “the reviewers typically don’t approve a loan modification if the borrower is eligible for unemployment”. We were told to document our loss of income, comparing our previous salaries to unemployment.
So much for BFB being customer-centric and attentive to our needs. Let’s do some math:
1) We were approved for a mortgage with a combined income of X. Fortunately, we have modest taste in housing and bought much “less” house than we qualified for.
2) On unemployment, our income was below 20% of our former earnings. Even my wife’s new job doesn’t bring us to 30% of our former income, as she took a substantial pay cut to get the position. In this economy, ANY job is better than no job.
While we’re smart enough to avoid credit card debt, we do have a car loan, and the lights need to stay on, and high-speed internet is more of a requirement than a luxury these days. Even cutting back on gas and groceries, there is a limit to how much you can economize.
So, if we’re currently making less than 30% of what we used to, is it reasonable to assume that we can continue paying the mortgage as if nothing has changed? Sure, it’s likely that I’ll eventually get a job, but who can predict when and at what dollar amount? It’s not likely that I’ll land a white-collar management salary in a market used to blue collar (or illegal alien) wages.
Here’s what I don’t understand: given the huge (and growing) number of mortgage defaults, does any bank REALLY want to take back another property? Wouldn’t it make more sense to keep homeowners with a spotless credit history in the property as long as possible, even if this means you make a little less on the loan each month?
Unfortunately, the days of banks having a personal relationship with their customers are long gone. I’m simply a number on a spreadsheet, and the bank has actuarial tables to indicate what risk I REALLY pose. Hell, they can probably tell me the exact hour I’ll finally decide to put the house on the market. I’m sure they know when I’ll start holding garage sales and selling everything I can just to keep food on the table.
It’s really no wonder why so many people have just mailed their keys back to their respective mortgage companies. In a lot of ways it makes more sense that playing Sisyphus in dealing with the bank’s indifferent customer service.
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