The bad-news: Fannie Mae reported today that they are establishing a new policy banning anyone who strategically defaults on their loan from obtaining a new Fannie Mae loan for seven years. Fannie Mae backs a large portion of residential mortgages in the US.
The really bad news: What exactly is a strategic default? Whether someone walking away from a mortgage/home is a strategic default depends on whether or not they are able to afford the loan. So who determines this? Now here is the really bad news: Your loan servicing company determines this. This means that Chase now has the power to threaten you with classifying your non-payment of your mortgage as a strategic default rather than due to hardship.
The good news: This Fannie Mae policy doesn’t really matter for a couple of reasons. First, if you default on a mortgage, it is not-likely that you would be able to obtain a new mortgage within seven years (when it goes off of your credit report) anyways. Second, at the rate they are going, Fannie Mae (and Freddie Mac) could be gone well before seven years comes around.
Don’t worry, be happy. With respect to your mortgage, make the decision which makes the most financial sense to you.
Chase is notorious for doing things that HUGELY affects its customers and never actually telling them. For example, changing minimum payments, interest rates, or available credit which customers only find about if they happen to notice the changes on their bill.
Chase is also notorious for foreclosing on properties such that the homeowners only find out about it when someone knocks on their door to take possession of the property.
Well, if CA bill 1275 is passed, they would be required to communicate their customers in the following ways:
- Mail borrowers a notice informing them of their foreclosure-related rights and foreclosure avoidance options that may be available to them.
- Mail borrowers an application for a loan modification or other alternative to foreclosure.
- Evaluate borrowers who submit a written request for a loan modification or other alternative to foreclosure for that modification or other alternative.
- Mail borrowers who have been denied a loan modification or other alternative to foreclosure a detailed denial explanation letter explaining the reasons for their denial.
Presumably, if the bank fails to properly communicate these things, homeowners will have some recourse to go after them in case of foreclosure.
Furthermore, the bill contains provisions that would allow homeowners to get foreclosure sales reversed if they are due to servicer errors. There is presently no recourse for this.
All I can say about this story is, this sounds REALLY BAD, even for Chase.
We were in the middle of a loan mod when we got the foreclosure notice stapled on our home…we called Chase they said to ignore it and we continued with the loan mod. Then a Real Estate agent told me our home WAS sold the end of July 2009. We then again called Chase and they told us that our loan mod was done and we were fine and if it was sold it would be re instated…once again we believed them. Our loan mod documents showed up via Fed ex in August 2009 and we have made our payments until April of 2010 when we were served an Eviction notice by a bank who bought it back in July of 2009!!…Now we had to hire an attorney since Chase was collecting our money and billing us and on paper the house isn’t theirs…it belongs to Federal Home Bank… so now what??? The attorney got the eviction stopped for now but Chase won’t respond to his letters…we still are living here but Chase isn’t getting anymore of our money untill I know where it is going.
It looks like Chase has graduated from petty crimes against its customers to pulling off some serious fraud. Could a big sophisticated bank like Chase really be this inept, or are they seriously getting into simply defrauding people?
David reports:
we received a Loan Modification Agreement from chase dated June 10, 2010. the property is 4 rental units, and payments are current. we DID NOT request a Loan Modification. this came FedEx with a cover letter urging us to hurry up and return the signed agreement by 6/24/2010.
we have been ‘pre-qualified’ for a ‘special program’. monthly payment remains essentially the same, mortgage balance to be reduced by $110,481 (from $330,481) to $220,000, term to be reduced by 119 months, and the current adjustable rate (3.03%) to become fixed @ 5%.
there may be tax consequences! on the reduced principal, and this could have an undesirable on our credit rating.
what is chase up to? we smell a rat!
This seems way too generous for Chase to offer to someone that isn’t behind on their mortgage payments and has NOT requested a loan modification. Are they soliciting this to get them to sign up for a trial modification with lower payments, then deny them, demand a baloon payment, and foreclose? Could Chase really be THAT predatory?
I’m a little confused about who they actually settled with, but a couple recently settled a lawsuit originally filed against Washington Mutual in 2008, before WaMu’s seizure and sale to Chase.
What is interesting though is the description of how they were treated by WaMu:
Lori Pestana contacted Washington Mutual, based on its public statements that the bank was interested in assisting distressed borrowers through its Homeowners Assistance Program. The lawsuit states that a company representative told her that to qualify, the couple had to be 50 days delinquent. So, she said, they didn’t pay.
When the Collections Department contacted her in the first week of September 2007, the agent explained that they would need to fill out a form for the program and return it. Lori Pestana offered to mail partial payments, but she was told that would disqualify her from the program.
Instead, on June 30, 2008, the couple were served with a summons and complaint by the Federal National Mortgage Association seeking to evict them.
Sounds familiar, right? This is exactly the kind of thing that Chase is accused of doing, telling homeowners to stop paying their mortgage and then foreclosing on them. Seems like this behavior isn’t new with Chase after all.
Here is a sad story of a 125 year old home beautifully restored by a couple who had an ARM loan with contractual limitations on how often the rate could be raised – once every two years. The loan was sold to Chase shortly after it was taken out, and Chase immediately started raising rates and did so every several months, despite the fact that they were not allowed to according to the letter of the loan.
Does Chase just not have a clue about things like this or do they just assume they can clean things like this up with a little lawyering?
Chase was a no-show for Atlanta’s Save The Dream event designed to help homeowners avoid foreclosure, even though every other major bank attended the event.
You’ve worked hard, dealt with Chase’s many hoops, and got a short-sale approved. Then a small hitch appears and the sales is delayed by a few days. Too bad says Chase, you have to start all over again.
Foreclosure, Legal & regulatory | admin June 25, 2010 | 
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