The Wall Street Journal seeks clarification on Chase Loan Modification Answers

May 14, 2020: Two days elapsed before Chase came back to the Wall Street Journal reporter with a revised comment on my situation. In the face of the evidence I provided, Chase had little choice but to modify their intentionally misleading answer.

Per the reporter:

“Below is Chase’s latest statement re your loan. Please let me know your thoughts. Thanks. 

Chase: We modified the homeowners’ mortgage in 2008, reducing the interest rate to 6% and locking in until 2013.  The homeowner applied for another modification in 2009.  

In the summer of 2009, in March of 2010, and in May of 2010, we notified the homeowner that she did not qualify for a second modification.  We determined that modifying the loan would produce less value to the loan’s owner than foreclosing, using analysis based on the Treasury’s model.  There also a question about whether it was her primary residence.”

My hair was on fire over this misleading representation of how I’d been strung along and flat-out lied to for over thirteen months. I wanted to run screaming to the reporter but I composed myself. The Wall Street Journal was a conservative publication and the reporter had an obligation to be objective and hear all sides. I was absolutely livid but I composed a measured response:

Thank you for giving me the opportunity to respond. Regarding the statement: We modified the homeowners’ mortgage in 2008, reducing the interest rate to 6% and locking in until 2013. The Loan originated as a sub-prime pick & pay with Washington Mutual on 2/26/06. Over the next eighteen months I received countless marketing solicitations offering to “modify” my loan to a fixed rate; they all seemed to focus on me paying WaMu some lump sum in order to “fix” my interest rate.

By mid to late 2007 I actually understood my loan and the concept of “negative amortization”. I started paying the full mortgage amount each month (the principal and interest) and even made some headway on reducing the negative amortization. Once I focused on the mortgage it was evident that when the loan adjusted, the interest rate was going to jump and the full amount would increase exponentially.

The Washington Mutual solicitations continued and with each “offer” the lump sum amount to “fix” the interest rate kept dropping. By January 2008 I could see that interest rates were going up and I feared the interest rate reset. In February 2008 I folded and paid Washington Mutual $995.00 for the privilege of locking into a 5/1 LIBOR Interest Only ARM at 6.62%.

To call this streamline refinance which I paid for the privilege of getting a “modification” is disingenuous at best; my “mortgage modification” consisted of nothing more than a five-year fixed rate interest only loan with a new higher (not lower) payment. The interest rate was not reduced, indeed, it increased.

Regarding the statement: The homeowner applied for another modification in 2009. This is correct; I initiated a modification request on 2/24/09 and was denied on 8/25/09 because: “Your property equity exceeds our program guidelines.”

Regarding the statement: In the summer of 2009, in March of 2010, and in May of 2010, we notified the homeowner that she did not qualify for a second modification. We determined that modifying the loan would produce less value to the loan’s owner than foreclosing, using analysis based on the Treasury’s model. I stand by my original comments: That is not correct. I have two written letters from Chase, which I have shared with you.

To reiterate: The first denial, dated August 25, 2009, states in one sentence: “Your property equity exceeds our program guidelines.” There is no reference to the Treasury’s model as a reason for denial; nor is there reference to a residency issue. The way Chase has worded this new response is disingenuous at best.  

The second written communication dated March 5, 2010 states “We are unable to offer you a Home Affordable Modification because we are unable to verify that you do live in the property as your primary residence”. There is no reference to the Treasury’s model as a reason for denial; regarding the residency issue, Chase has three years of Federal Income tax returns at the address (I can provide five years worth) & five years of voting records. Chase confirmed my residency was not an issue and reopened the case (which is why they kept working on it and allegedly generated another denial in May 2010).

Regarding: the May 2010 denial Chase references. As previously noted, I have received no written communication of this and know only from a call I placed yesterday (5/13/10) that, per Rafael in Loss Mitigation at Chase, the modification was denied on 5/4/10. It is again disingenuous at best to state Chase notified the homeowner, as, without your intercession, I would STILL have no knowledge of this denial; I waited again for the mailman today before responding and there is nothing from Chase.

Regarding the statement: We determined that modifying the loan would produce less value to the loan’s owner than foreclosing, using analysis based on the Treasury’s model. This has not been communicated to the homeowner in writing at any time. I am aware of this ONLY through your email asking for a comment on Chase’s initial response and subsequently through the above referenced Springboard conference call of 5/13/10. Also, I am not certain but I believe the Treasury’s model applies to HAMP modifications, and was we know, I have never qualified for a HAMP modification.  

Finally, I stand by my statement submitted 5/14/10: The opaque banking procedures practiced by Chase do not help the homeowner, they help only the investors. 

If I knew back in February 2009, or even August 2009, what I know today — that the investors behind my loan find it more profitable to foreclose (negative net present value) than to work with me on a modification — I could have made an informed decision. I would have taken the hit and drained my IRA to bring the loan down to a smaller amount and refinanced while my credit record was excellent. At this point, my savings are depleted and my credit record is distressed; even if I reduce the loan amount, no lender will refinance.

 

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Chase loan modification denial due to negative net present value

May 12, 2010: Even as I was taking Ms. De Laura’s (214) 626-2671 “courtesy” call from the Chase Home Lending Executive Office, an e-mail from the Wall Street Journal was waiting in my in-box, with a comment from Chase. Per the reporter:

“Here’s the response I got from Chase re your situation:

Chase communicated to the customer in the summer of 2009, in March of 2010, and in May of 2010 that the customer would not qualify for a loan modification because the analysis showed a negative net present value.   

 Is that correct?”

Was this another test? I composed my thoughts and replied:

“That is not correct. I have two written letters from Chase. The first denial, dated August 25, 2009, states in one sentence: “Your property equity exceeds our program guidelines.” 

The second written communication dated March 5, 2010 states “We are unable to offer you a Home Affordable Modification because we are unable to verify that you do live in the property as your primary residence”.

The case was reopened once I provided my voting records and residency was proven. 

There is nothing in May of 2010, indeed Shawnte Trowlsdell told me on 5/10/10 a letter was to have gone out on April 30th but it did not; she could not see the letter and did not know what it said or why it was not sent. My mailman has come and left today and there are no letters from Chase. The phrase “negative net present value” has never been used nor do I really know what it means…

Two minutes ago Chase called to tell me they were composing a written response to my letter to Mr. Lowman.” 

I was beside myself. I now had an answer, whatever “negative net present value” meant, because this was the first time I’d ever seen those four words in a sentence, and the sentence came from Chase via The Wall Street Journal. There was nothing in writing from Chase about this, nor had those four words ever been expressed in any of my hundreds of calls to Chase.

I didn’t know what it meant but I did know that the response from Chase was curiously worded in such a way as to imply I’d been told all this before, which was simply not true. There were really two sentences in the quote, strung together with the word “because”, only the “because” had never been shared with me. 

The Wall Street Journal needed to know this so I faxed the reporter copies of my two denial letters. I also sent a shout-out to my banker and broker friends to learn the meaning of “negative net present value” 

I spoke with my broker and another broker and a banker I knew – all were mystified by the term “negative net present value” and thought there must be some kind of mistake since I was not underwater in the loan, indeed; I had some equity, as evidenced by the August 2009 denial. The banker said she would dig deeper and get back to me. This was the same banker who had helped me prepare my monthly expenses spreadsheet; she was familiar with my situation and eager to offer assistance. 

Finally I sent an email to the Wall Street Journal reporter and expressed my frustration over not knowing what those four words meant and anger at having never seen them before. They seemed like more bank-talk designed to confuse and obscure, why couldn’t the guidelines and the formulas be transparent? 

His reply was chilling: 

What they mean, I believe, is this: It isn’t in the best financial interests of the owner of the loan to give you a modification. I believe they mean this: the net present value formula shows they would be better off either collecting payments from you under the current terms or foreclosing.”

 I hoped he was mistaken but I knew at that very moment that Chase had been playing games for with me for over fourteen months; they had only provided a clear answer when backed against the wall by the Wall Street Journal.

Was this the new American way, or just the Chase way? It seemed to me that Chase was continuing the predatory loan practices devised by Washington Mutual, and they were even better at playing the game.  

Chase Home Ownership Centers are not decision makers!

April 20, 2010, 11:25 am: I asked Jason Papa what the function of a Chase Home Ownership Center was and if I should drive there for a face to face meeting. He said “anybody active we can’t take”; we “originate and monitor applications” and “we are not decision makers at the Chase Home Ownership Center”; he went on to say they were a “contact point” for the consumer. He remembered my loan and requested permission to pull the file. I agreed and we talked about the situation.

I wanted clarification on “too much equity” and the 30% formula Jacqueline Ham from the Chase Home Lending Executive Office had provided on February 12, 2010. Jason said if my monthly mortgage payment was less than 31% of my monthly gross pay I would not qualify for HAMP. I reminded him my loan did not qualify for HAMP regardless, but I was asking about the equity formula, not the relationship between monthly mortgage payment and monthly salary. I also made it clear my monthly mortgage payment was far greater than 31% of my monthly gross salary. Jason was stuck on HAMP and referenced the $727,750.00 cap. (I didn’t bother to point out that in Cape May County, NJ the cut-off was $487,500.) I jumped in and said it was not about HAMP. I was asking about the Chase in-house program – I thought Chase had another program, an in-house program that he’d mentioned in our January 5, 2010 call.

Jason said I’d been denied (in August 2009) but I could always “apply again if my situation changes”. I said my situation had changed; my savings were depleted and I was pursuing the 12/11/09 loan modification application allegedly underway. I said an interior appraisal had been done on 4/1/10. Only then did Jason realize what I was talking about and he said he could not help me. I persevered and asked about a face-to-face meeting with a decision-maker; Jason said “no one meets with the decision-makers” (Nobody gets in to see the Wizard, not nobody, no how!) and the decision-makers “don’t write a lot of letters”; “they only send one when the decision is made”.

Based on my attempts to get a copy of the denial letter allegedly sent 6/30/09 and/or 8/25/09 for my 2/24/09 modification, I knew this was true. Chase put as little as possible in writing, thus continuing the opaque banking practices and predatory lending schemes devised by Washington Mutual.  I thanked Jason for his time and we ended the call.

Chase Home Lending appraises my home – how much will it be?

March 29, 2010: Jim Carr, an independent appraiser, contacted me to schedule the appraisal “tomorrow”. There was no discussion of price or cost to me. We settled on April 1, 2010 as I would be out of town on business 3/30-3/31/10.

April 1, 2010, 8:35 am: Laura called from Chase, looking for money. I told Laura I’d mailed a full payment plus late fees on 3/31/10 and Chase would have it by 4/5/10 as I’d promised. I went on to say the next time I could make a payment in full would be 6/5/10.

April 1, 2010: The interior appraisal was conducted. Mr. Carr told me he was a sub-contractor and had no direct dealings with Chase. He was merely sent out to conduct the appraisal which would then be turned over to his bosses who would in turn provide it to Chase. He felt Chase would have the appraisal in hand no later than Monday, April 5, 2010.

Still waiting for answers from Chase

March 26, 2010, 4:00 pm: I called the Chase Executive Lending Office and asked to speak with someone in Megan’s absence. Makisha handled the 30-minute phone call, verifying Megan was out until 4/5/10 as she tried to get an answer on scheduling the interior appraisal. She said “they” had forwarded the request to the Appraisal Dept. I asked if a Chase employee would conduct the appraisal; she said no, an independent appraiser would contact me and I would negotiate price. I was stunned and asked, if I was going to pay for it, why couldn’t I just pick my own appraiser and get things moving? Makisha said they had to be “legitimate” and Chase had a list of approved companies. I asked for the list so I could start negotiating price and expedite getting an appraiser out – she said it “wasn’t done that way”. Makisha expressed surprise that Megan hadn’t covered any of this and also that I hadn’t been re-assigned to someone during Megan’s absence. She went on to say I would have to wait for the appraisal to be scheduled; it would take 7-10 days. I asked when the count of 7-10 days started and Makisha said she had already given me “way more information than she was supposed to”. I backed off as she had been helpful and thanked her for her efforts. Makisha said she would note our conversation in the file.

Hey Chase, should we burn the house down?

My home is priceless to me, but as of 1/31/10 the assessed value of my modest two-bedroom, one bath house is $159,800. I designed and built the all-wood, metal roof home and it is unique. Unique, however, does not mean saleable, or even rentable, as my realtor friend had made abundantly clear.   

In an all-wood home the possibility of loss by fire is a concern, especially after a raging fire destroyed 39 Avalon, NJ condos in December 2003. Coupled with an article I read about the importance of insuring properly for “replacement value”, I’d kept a close eye on my property insurance.  

By January 2006 I worried I might be under-insured and took a closer look at my policy. The replacement value seemed low and I feared that if my home burned to the ground I wouldn’t be able to replace it. I requested an increase to a dollar amount I thought was more realistic, only to get push-back from the insurer.  I pressed the point so Selective Insurance Company sent out an appraiser who set the replacement value at $285,000. This was still low in my mind, but in mid-February 2006 we compromised at a value of $425,000. 

I escrow my insurance and property taxes. Once comfortable with the replacement value on my home, I moved on, until I pulled the policy for review in December 2009.  I was stunned to find my home insured for $905,000, more than double the figure I’d reached with Selective. Of course the payee was Chase, and as I followed the paper trail I saw the folks at Washington Mutual had upped the value of my home on me. So now Chase thinks I’m living in a $905,000 house. Hey Chase, I love my home but in Avalon parlance, it’s a “tear-down”. Is that why you won’t work with me on a loan modification? Do you think I’m living large in some big house? I’m not. I’m living very small in my tiny home on the bay.

Chase, what’s the problem with equity?

March 3, 2010, 8:45 pm:  Keisha Hackney phoned looking for payment. She told me I was denied because I had “the equity” and that I should list my home for sale; a modification was not available for me. I should liquidate my assets and pay up; consider a short sale. I will receive a denial letter and a letter with intent to foreclose. I was denied because I have “the equity” and I “should have refinanced or pulled all the equity out.”

Ms. Hackney had the unique ability to make having equity sound like I had the clap.

I asked if Chase merely serviced the loan and she said no, “this is an asset loan in the portfolio” (interesting, because I strongly suspected this particularly predatory Washington Mutual loan had been sliced, diced, repackaged as a mortgage-backed security and sold down the river.) I said I was going to make a payment March 5 but had been told it would not be applied if it was a partial payment; she confirmed this. I said I could commit to a full payment with late fees by April 5, 2010. She told me she would note in the file I “was not able to make a commitment at this time”. I said I was making a commitment but she would not hear of it. I ended the call.