By Alex J. Pearlberg, Esq.
So imagine you are behind in your FHA- backed mortgage, the property is way upside-down and you wish to exercise all of your loss mitigation options. As the homeowner, you have submitted all of the documents required by the servicer on your loan. Bank of America (BOA) and you have been denied for a HAMP loan modification. You have had the property listed for sale for over nine (9) months and have yet to receive an offer at anywhere close to the market value, much less the balance on the loan. BOA has sent numerous letters indicating there may be other alternatives, including a deed in lieu of foreclosure and monetary help in relocating. After thinking long and hard, you have decided to give up your homestead and surrender the property to the lender by way of a deed in lieu. One problem: BOA now indicates that “due to recent changes in FHA guidelines you must submit and proceed through the BOA short sale process and department.”
As attorneys, we are always trying to stay on top of any changes which impact our clients. So off I went to try and find the changes that BOA indicates that FHA, as the lender and holder of the note is now requiring. Surprise, surprise! No such changes exist, there are no new mortgage letters indicating any new requirements for any homeowner agree to a deed in lieu of foreclosure. In an effort to cross our T's and dot our I's, we communicate in writing to the single point of contact (SPOC) with BOA just in case we have missed something along the way.
We also went the extra step and contacted the FHA directly to see if there have been any changes or whether we are unaware of any additional requirements to completing a deed in lieu of foreclosure. We request a copy in writing of the new guidelines or requirements, and attach a copy of the most recent mortgage letter which governs the requirements in all loss mitigation options for the FHA, in particular point out the requirements for a deed in lieu and providing documentation of the homeowner complying.
The FHA representative clearly indicates that there have been no new requirements and that there is currently no requirement to go through a short sale process. The SPOC indicates that regardless of our letter, sent by the attorney, the homeowner still needs to go through BOA short sale process and the homeowner will not be considered for a deed in lieu otherwise. At no time did the SPOC provide any basis, mortgage letter, rule, regulation or other directive from the FHA that any new requirements were necessary.
In the wake of the recent whistle-blowing of former BOA employees ("We were told to lie"), it certainly appears that BOA feels they can do what they want when they want to. Bank of America needs to be held responsible, they have taken huge sums of money from the U.S. Government and continue to receive huge servicing fees on FHA loans. Could it be that BOA has instructed their SPOC employees to put up roadblocks (i.e. extra requirements) in order to retain the loans just a little bit longer and continue to collect the servicing fees? Makes sense to me, since a Deed in Lieu would essentially allow the property to be placed back on the market by the FHA and BOA would most probably be cut out of the proverbial loop.