Loan Mod Profiles: Delayed then Denied, Often Mistakenly

Retired pastor David Moe describes the process of trying to get a loan modification -- only to be denied after more than a year -- as nothing short of "The Twilight Zone."

"I keep waiting for Rod Serling [3] to walk out and sit down in my living room," he says.
Moe is one of more than 520,000 homeowners who have had trial modifications through the government's foreclosure relief program but have eventually been denied permanent modifications, according to Treasury

Department data [4] [PDF]. The program puts eligible homeowners in three-month trials, at which point their mortgage servicer determines if they qualify for a permanent modification.

An additional 538,000 homeowners have been rejected for even trial modifications by the eight largest mortgage companies participating in the program. (The Treasury Department has not released program-wide data.)

Program guidelines say homeowners can be denied for a number of reasons, including further reductions in income, missing trial payments or not being able to document their income. However, it appears that in many cases, servicer errors, such as losing paperwork and improperly calculating income, have caused denials.

Moe says he first contacted Chase, his mortgage servicer, in February 2009 when he and his wife had a large drop in income but still wanted to keep their home in upstate Michigan. After months of back-and-forth with Chase, Moe started a trial plan in October. More than six months later, Chase sent him a letter denying a permanent modification, saying he did not have enough income. Chase would not count the self-employment income that Moe earns from contract work with a local newspaper. Servicers are supposed to count self-employment income, according to program guidelines.

Chase spokeswoman Christine Holevas says, "We worked with the borrower, but we were unable to approve a modification."

Many homeowners believe their denials were the result of servicer mistakes [5]. Belinda Stanley of Kentucky says her mortgage servicer gave her four different reasons for being denied, including that her husband made too much money. "What husband?" she says. "I've never been married."
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