This Mortgage Modification Story Is So Terrible Because It's Probably Very Common

Like a lot of people in ridiculous housing markets a couple of years ago, Jeremy Fletcher of Northridge paid way too much for a house in the San Fernando Valley because that was the only way to buy a house just a couple of years ago. He's a swimming pool contractor, so there's a double disaster in the works: overpriced house in overheated market, borrower depends on housing-related construction business income. And then a wonderful bank does a wonderful thing:

 FireDogLake reports:  

Months later, in June 2009, right when he was thinking about selling the home and downsizing into a more affordable residence, Citi called him unprompted. “They said ‘we see you asked about HAMP, and we’re giving you a trial modification today.” The terms, a 2% interest rate for five years, would dramatically lower his monthly payment, from $4,200 to $2,170. They signed him up over the phone, he made his first payment by ATM card, and that was it. Within a few days, they sent over a modification package that put it in writing: if Fletcher made his trial payments for 90 days, and sent in his application with a full income statement that qualified, “we will give you a permanent modification.”

Fletcher sent in the application; he made his payments; he waited the 90 days. When he heard nothing the fourth month, he called and was told by Citi that they were backed up but everything was fine, and to continue to make the trial payments. This went on for a full year, always being told (by a different rep from Citi every time) he was fine and the permanent mod was a matter of time.

In June 2010, he made his payment, and got a call 10 minutes later from the collections department, telling him that he was 12 months due on his loan and owed $15,000.

He finally gets a lawyer friend to help out, and Citi suddenly says, "Oooooh, got a lawyer now, eh? Well let's get everything settled," and then Citisettles itby selling the mortgage to some shark, and now the foreclosure inspectors are poking around to see if anyone lives in this house, which cost $900,000 a few years ago. [ FireDogLake ]