Part I of this series, Part II, Part III, Part IV, Part V, Part VI.

Shirley Snider lives in Vashon Island, Washington, and has a mortgage with Citi. Her story is a textbook example of how banks and servicers have used the HAMP modification program to lock borrowers into worse terms than the program mandates. Often, HAMP is used as a means to an end – to force the borrower into a no-win situation where they have to accept what the bank offers, or lose their home.

Her overall story is familiar. Shirley has lived in her home since 2001, and always made her payments on time, as well as making significant investments in the home. “This is my investment for retirement, as well as a loved home for myself and my elderly mother,” she said in a letter to Sen. Maria Cantwell (D-WA) about the issue, provided to FDL News. But Shirley ran into trouble during the recession, with reductions in her income and increases in her cost of living. She was borrowing from her family to make the payments. So, Shirley applied for a loan modification through HAMP in January 2010.

She was almost immediately approved for a trial modification by Citimortgage, reducing her monthly payment from $1,406 a month to $889 a month. After this she was subjected to the typical process described in this series of delays by the servicer, persistent requests for income documentation, and the like. Shirley would get messages about missing information, and then be unable to get a human being on the phone for as long as 3 hours when she called back. She received a lot of conflicting answers and never got the confirmation that she was supplying the right documents.

Because the trial modifications were placed in a different department, Shirley received Collections notices and eventually default notices as a result of being in the program. This unifying feature of HAMP, always explained as something to disregard, causes a lot of stress for the borrower and prepares the ground for even more pressure upon denial of the modification.

Citimortgage extended the trial modification process beyond the expected 90 days, and offered no information to Shirley in the succeeding months. Finally, she called in June to get some answers. This is from her letter to Cantwell:

Finally when I called on June 15 I was told my application had been declined the day before due to insufficient income. I asked how much short I was and was told $200 year-to-date income. When I checked the figures they used I found they had undercalculated my gross income from my first job. In addition, I told them I had received an annual raise towards the end of the trial period and asked if this could justify a reconsideration of my application. I was told yes, it could, and to fax the updated income information/paystubs along with a letter from my employer (verifying the raise was permanent) to “Modification Disputes”, which I did on June 16.

This continued for several weeks. Shirley kept calling to see if the new data on her income had been re-entered, and never got a positive response. Meanwhile she kept making trial modification payments through this period. She had to fax and re-fax information. Finally, in early July, she was told her case was closed, without explanation. Her HAMP application was permanently denied (she’s yet to see a written denial). And she owed between $4,200 and $5,200 to Citimortgage (which is the difference between the trial and permanent mods, the payments themselves being held in escrow, and penalties) and would face foreclosure within weeks if she didn’t pay.

This is where the bait-and-switch comes, as Shirley explained to me:

After being denied for HAMP, rather than try to come up with $4,200 – $5,200 (depending on which letter you believed) that Citimortgage said I owed them to avoid foreclosure, I signed for the non-government 40-year “private investor” modification proffered by the bank that ended up only saving me $271/mo rather then the $517/mo I saved during the trial period in the HAMP program. The interest rate, rather than the 2% offered by the HAMP program, is 4.875%, which is not even competitive with other rates on the market right now (originally they proposed 5.125% and I argued them down…slightly). The only reason I agreed was because of the foreclosure deadline (which they kept telling me I could ignore, but at this point I didn’t believe anything they said). They tell me this is a modification of my original loan and that there are no prepayment penalties but I have yet to see any of this in writing. Of course, I want to be able to shop around for more competitive rates, but right now my credit is ruined for supposedly not paying my mortgage for 6 months (even though I made all the trial payments on time).

Sen. Cantwell, according to Shirley, has forwarded a complaint to the Office of the Comptroller of the Currency over Citimortgage’s practices in this case.

As Shirley says, “This has been an inexplicable, frustrating, terrifying and exhausting process. At the end of it you go along with what they say because you are afraid you could actually lose your house.” This is what the banks have learned. They don’t need HAMP at all to modify mortgages. In fact, they’re better off going outside the system. But they are happy to take payments for a number of months, string borrowers along, and put them into a no-win situation. At the end of that road, they either got to wait months if not years to foreclose on the home, or set up a process where they’ll keep collecting on it, on their terms, not the government’s.

I’ll leave Shirley’s words to Sen. Cantwell as the last word:

I am dumbfounded that having applied for this program set up by the U.S. government to help those in compromised financial situations keep their homes, that I actually found myself in a more vulnerable state to losing my home than before I applied.

I want to tell more of these stories. If you or someone you know has experience with the HAMP program of any kind, please contact me at david-dot-dayen-at-gmail-dot-com.