Beware the Loan Modification That Is Not

Now, I‟m no fan of Bank of America. I thought its plan to charge its customers a fee just to get their own money a bit over the top.

And, in my practice, I‟ve gotten numerous phone calls from homeowners bemoaning the harsh treatment they claim they‟re receiving from Bank of America. But there‟s a recent decision (Nungaray v. Litton) in which, amazingly, Bank of America won and I agree with the decision.

Ruben and Dora Nungaray bought a home in Simi Valley. In 2006, the Nungarays refinanced their property and executed a promissory note for $500,000 and a deed of trust securing the obligation.

Things were going fine until 2009, when the Nungarays failed to pay the mortgage. Apparently, they hired an attorney that tried to work things out with the bank. Feeling pressure from Washington (especially after reportedly taking a Troubled Asset Relief Program handout of $20 billion), Bank of America participated in a program to work with folks having problems paying their mortgages. (For Bank of America, this
must seem like a classic case of the shoe being on the other foot.)

So, when the Nungarays approached the bank about working out some type of modification, they initially received what seemed like a  avorable response from the bank.

The couple was sent a loan workout plan, a document that perhaps gave some confusing information. For instance, it said,

“If I am in compliance with this loan workout plan (the „plan‟) and my representations in Section 1 (regarding ownership of the property and documentation of financial hardship) continue to be true in all material respects, then the lender will provide me with a loan modification agreement.”

So, great – it looked like the Nungarays were on their way to some real relief. But, I guess they didn‟t read the entire document or at least read it carefully. (Now, if you‟ve been reading my column for a while – what do I always say? Do not sign anything without reading and understanding it!)

You see, further in the plan, the Nungarays agreed to provide some financial data to prove that they were having severe economic difficulties, warranting the loan modification.

In defense of Bank of America, it gave the Nungarays almost six months to send in paycheck stubs, tax returns and other documents. For whatever reason, that did not happen.

Bank of America finally gave up and removed the hold on the foreclosure process. Unfortunately for the Nungarays, their home was foreclosed and sold to the bank in 2009. I guess they just didn‟t read the plan closely enough. When the Court of Appeal
considered their argument that signing up for the plan was equal to a loan modification, the court ruled the plan “is not a modification of the loan documents and the documents will not be modified unless the Nungarays” meet all of the conditions required for
modification, including the Nungarays‟ receipt of a “fully executed copy of a modification agreement. The plan also required the Nungarays to submit financial information regarding their hardship and states that Litton and the bank would determine
whether they qualify(ied) for the offer.”

The court sided with Bank of America‟s argument that the plan was a temporary fix, not a permanent one, and that the plan told the Nungarays in no uncertain terms that this was the case.

Remember, if a contract doesn‟t say something that you think it should, then unless you force it in, a court later on will not add it in for you.

And in honor of Thanksgiving Day, I want to give thanks for my lovely wife, Terry, and my three tremendous sons, Ted, Carl and Scott.

Also, thank you, my loyal readers (all four of you). I always am grateful whenever I meet one of you and hear you gently explain that I don‟t have a clue about what I‟m talking about.

And, of course, thanks to The Mighty Signal for providing me some space in the paper. I‟d gladly do it for half of what I get (half of zero is?).©

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