Loan servicers regularly tell homeowners that investors or investor restrictions prohibit mortgage modifications, but ProPublica has found that the contracts governing these loans often aren’t very limiting.
How a servicer can and can’t modify a loan is laid out in a contract it has with investors, and the contracts are public information. Some homeowners’ advocates have taken to looking at the contracts themselves to verify the barriers that servicers say exist. Finding the contracts, however, can be complicated. Here are some resources for digging up this type of information.
Getting professional guidance
Mortgage-backed securities are inherently complicated, so homeowners should consider getting help from a housing counselor. Free help from a HUD-certified counselor is available through the HOPE Hotline at 1-888-995-HOPE, or online through the HUD website. Be cautious of any private companies that ask for money upfront.
Counselors and advocates typically have more resources and connections than homeowners to work with servicers to reach a resolution. If they believe there’s a legitimate problem with a servicer, they can escalate a case to an internal department at Fannie Mae, which administers the Making Home Affordable Program.
Finding the owner of a loan
To find the name of mortgage-backed security that owns a loan, send the servicer a “qualified written request” under the Real Estate Settlement Procedures Act, which requires the servicer to acknowledge the request within 20 days and to try to answer the request within 60 days. HUD has a sample letter available online. Be sure to keep the request focused (long requests may be considered “unqualified”) and ask for the full name of the security or trust that owns a loan. In the letter, you can also reference the section of the Truth in Lending Act (15 USC sec 1641 f2) that says:
“Upon written request by the obligor, the servicer shall provide the obligor, to the best knowledge of the servicer, with the name, address, and telephone number of the owner of the obligation or the master servicer of the obligation.”
Alternately, foreclosure notices typically have the name of the trustee and the security listed on the letter or in the supporting documents. Keep in mind that the names of the securities are complicated. For example, the trust that owns the mortgage of Arthur and Alberta Bailey of Louisiana (mentioned in our story on investor-related denials) is called “CWABS Inc. Asset Backed Certificates 2006-9.”
Reading the contracts
Pooling and Servicing Agreements (PSAs) and the prospectuses for mortgage-backed securities are available publicly on the Securities and Exchange Commission website, but they can be hard to find. Jeffrey Gentes, an attorney at the Connecticut Fair Housing Center, has been presenting instructions (PDF) to housing counselors on how to search the site for the contracts.
The contracts can be hundreds of pages long and difficult to understand, so review them with a housing counselor or an attorney to determine if there might be a problem with a servicer’s denial of a mortgage modification.
Finally, securities issued in 2006 and after often submitted a full list of every loan in a pool to the SEC when the trust was created. These are usually filed in a “Free Writing Prospectus,” which you can find on the SEC’s website the same way as a PSA. These initial reports can be helpful, to confirm that a mortgage was actually owned in a particular security based on the loan number.
Finding investor reports of modifications
Trustees issue monthly reports to the investors in a security, which can be valuable because they report the modifications done in a loan pool. The reports are often publicly accessible online, though the sites can be hard to find and navigate. First, make sure to know the name of the security’s trustee (not the issuer or servicer), which is in SEC documents (see above) or on foreclosure notices. Then try to find the exact trust, or “deal,” on the trustee’s website. Some sites are organized by the name of the trust, and others by the issuers of the security; it takes some digging. The reports for each trust can be different, but in general, modification stats are in the monthly summary statements or loan-level data.
Here are links for reporting sites at the four largest trustees in the country: Deutsche Bank, Wells Fargo, US Bank and Bank of New York Mellon, which includes securities where JPMorgan Chase was initially the trustee.
Read the main story: When Denying Loan Mods, Loan Servicers Often Blame Investors -- Wrongly