Media Intervention Gets Loan Servicer To Cancel Foreclosure Sale Triggered By Its Own 7-Cent Error In Loan Modification Agreement

The Associated Press reports:

• Towana Gooch, a single mom who lives with her 10-year old daughter, was on the verge of losing her town house in suburban Maryland after her mortgage lender kicked her out of a government loan modification program. The problem, she says she was notified, was a 7-cent error. Later, the lender told her the tiny error wasn't actually the issue, that her low income disqualified her from the program. She called the bank trying to get to the bottom of it all, but she got no answers and feared there was nothing to head off foreclosure, scheduled Friday.

• After an inquiry by The Associated Press, the bank, America's Servicing Company, a division of Wells Fargo & Co., finally returned her call this week to apologize for the 7-cent error and say the foreclosure sale had been put on hold for now.(1)

For more, see Bank errors mar mortgage relief.

(1) According to the story, Gooch is far from alone in her problems with the Obama administration's loan modification program. Seven months in, many qualified applicants are being rejected, often through bank errors, with no avenue of appeal. Until this month, lenders didn't even have to tell them why. "If the servicer messes up, even by accident, there is no meaningful way to complain, no real appeals process, no viable ombudsman to consider," said Kevin Stein, associate director of the California Reinvestment Coalition in San Francisco. "Most importantly, there are no consequences to the banks for failure to do what they have promised to do." Government officials can't say how many people have been turned down because of a typo, lost fax or an oversight by a poorly trained bank employee. But the Treasury Department acknowledges that far too many applicants have wrongly been rejected.

In Gooch's case, the bank initially notified her about her loan modification application and told her that her monthly payment would be cut in half, to $938. Gooch agreed to the payment. But America's Serving Company later notified Gooch that she no longer qualified for the program because her first automatic withdrawal payment should have been $938.07, not simply $938.