The letter that arrived at Luis Navarro's home in Shakopee last February relieved months of stress. "Congratulations," the letter said, announcing that Navarro qualified for lower mortgage payments under the Obama administration's marquee foreclosure rescue program.
After proving financial hardship, Navarro signed a contract with his lender, CitiMortgage, that permanently cut his monthly payments by one-third. Then, in April, he was shocked when his lender demanded a payment of $8,000 or else risk losing his home.
Because of an underwriting error, CitiMortgage should never have modified the loan, Navarro was told, so the new mortgage was canceled. Navarro's efforts to find out why were met by a "runaround," he said.
Within two weeks of Whistleblower contacting CitiMortgage last month, the company apologized to Navarro and restored the modified mortgage. CitiMortgage spokesman Mark Rodgers blamed the "highly unusual" problem on "technical processing issues," but did not clarify. "When such matters are brought to our attention, we try to fix the problem, book the modification, and make other accommodations to the borrower, as appropriate, as soon as reasonably possible," Rodgers said.
A spokeswoman for the federal Home Affordable Modification Program (HAMP) said this was the first report she had heard of a permanent mortgage modification being canceled because of a bank error. But to advocates for homeowners fighting off foreclosure, CitiMortgage's action in the Navarro case is a symptom of the banks' back-office chaos that also produced the "robo-signing" scandal that hit large lenders in late September, in which thousands of foreclosure documents were improperly signed by overworked bank employees.
"Not only are they entering into a contract ... but they're doing it under the auspices of a government program that's supposed to help people," said Carl Christensen, a Minneapolis attorney who said he has handled four cases similar to Navarro's. "CitiMortgage can't just take it back and say, 'We're sorry, when we told you we could help you. We really couldn't help you.'"
Looking for a rescue
In 2007, Navarro bought a two-story house on Molina Street that offered sweeping views of cornfields and green hills beyond. He and his wife imagined it as the perfect home to raise a family.
He took out a 30-year, $256,000 loan from CitiMortgage, a branch of New York-based banking colossus Citigroup, and had no trouble making the $1,848 monthly payments with what he earned as an installer with Comcast. But as the economy soured, Comcast cut Navarro's hours. In late 2008, he suddenly found himself trying to keep his house with one-third less income.
Like millions of Americans, Navarro was buoyed by the announcement in early 2009 of President Obama's foreclosure rescue plan, which rewarded lenders for lowering loan payments so people could stay in their homes. Many of the lenders themselves have already gotten help from taxpayers: the Treasury Department stepped in to save Citigroup in late 2008 with $20 billion in cash, which the bank has since repaid, and agreed to back up the bank's risky assets for billions more.
Navarro sought help through HAMP, and within months he was paying a third less each month for his mortgage under a trial modification.
The letter that Navarro received in February announcing his permanent loan modification made him one of more than 468,000 Americans who have received this relief, the ultimate goal of the foreclosure rescue plan.
Navarro got a copy of the signed contract for his new loan and figured all was well. He called CitiMortgage in early April, a few days before his 30th birthday, to make his monthly payment. That's when he learned of the $8,000 balance because his modified mortgage had been "unbooked." When Navarro asked why, he said, he was told an underwriter at CitiMortgage failed to account for some money, prompting Fannie Mae to reject the loan application.
Suddenly Navarro and his wife were back in financial trouble. The stress took a toll on their marriage as they lay awake at night and argued about how they got into this mess. The monthly statements showed their balance due climbing to $14,000 by October. His repeated calls to CitiMortgage, and enlistment of a housing counselor, weren't getting him anywhere.
"You don't know if the house is yours or not, or if you're going to be kicked out," Navarro said.
In its statement to Whistleblower, CitiMortgage's Mark Rodgers declined to say what went wrong with Navarro's loan. The company's website acknowledges that the recession caused "new demands on back-office processes" that are now "coming under review by customers, regulators and government authorities."
Kathleen Day of the Center for Responsible Lending, a national advocacy group, has a more pointed description: "This is emblematic of a broken system." Her group helped uncover the "robo-signing" scandal that prompted some banks to halt foreclosures nationwide, putatively to ensure that its workers weren't signing off on home repossessions without actually reading the documents.
With his modified mortgage restored, Navarro said, he's glad to be rid of the stress once again. But he's still puzzled that he came so close to losing his home.
"I'm not delinquent or anything," he said. "I've never missed any payment."
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