Don’t Bank on Loan Modifications, A Cautionary Tale

Don’t Bank on Loan Modifications, A Cautionary Tale

Tim Neff was a homeowner and corrections officer at the now closed Mohican Juvenile Correction Facility. While attempting to restrain an inmate in 2009, he suffered a serious back injury that put him on worker’s compensation and effectively ended his career. Around this time, he and his wife applied for a loan modification with their mortgage company, Flagstar Bank, in an attempt to make their mortgage more affordable under their new circumstances.

The Neffs claimed that Flagstar made repeated assurances to them that their request would be processed. The loan modification was necessary for the Neffs to keep their house now that Tim was on worker’s compensation and making a fraction of what he made while working as a corrections officer. Throughout the next two years, the Neffs would repeatedly call Flagstar inquiring about the status of their loan modification, to which their representatives allegedly responded by stating it was processing and requesting more documents. The Neffs readily provided Flagstar any documents that they asked for, and maintained that the bank led them to believe that the much needed loan modification was just around the corner.

In contrast to this, the Neffs alleged to receiving several notices from Flagstar and their attorneys stating that their mortgage was in default, and eventually foreclosure. They claim that when they asked Flagstar about this, the company responded by again requesting more documents and assuring the Neffs that the loan modification was still being processed. According to the lawsuit, Flagstar’s representatives even went as far as to describe the foreclosure as a “formality.” When the Neffs asked Flagstar whether or not they should hire an attorney to answer the complaint, Flagstar allegedly responded by telling them it was unnecessary and that they could do everything an attorney could.

In December of 2011, the Neffs learned through their local newspaper that their house was due to be sold. Their decision to put faith in Flagstar’s alleged assurances proved to be a fatal mistake. It became apparent to them that Flagstar had made the decision to proceed with the foreclosure process, despite the assurances the Neffs claimed to have received. According to claims made by Flagstar, the company decided to reject the Neffs’ application for a loan modification in December 2010 due to their failure to provide a singular tax document. However, the Neffs maintained that they were led to believe their loan modification was still being processed until they were made aware of the sale of their property.

The Neffs immediately sought counsel upon learning of this sale, but unfortunately it came too late to stop anything. Doucet & Associates fought hard for the Neffs, going as far as the US Sixth Circuit Court of Appeals twice, but we were ultimately unable to prevent the foreclosure or obtain monetary justice for their horrible ordeal. This should serve as a warning to anyone dealing with a mortgage company to not take anything at face value, especially if you are concerned about foreclosure. Flagstar likely spent hundreds of thousands of dollars in legal fees rather than working out a loan modification with the Neffs, which ultimately led to the Neffs losing their home.

Time is often a critical factor, especially when it comes to foreclosure defense. If you believe foreclosure may be imminent, seek legal advice. Feel free to call our Ask a Lawyer Hotline at (614) 221-9800 if you are concerned about your mortgage.

 

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