Mortgage adjustment nightmare

January 26, 2009 3:02:35 PM PST
Imagine making your mortgage payments on time, but being told by your bank that you're in default. It happened to a woman on Long Island, and the reason she says she was given is pretty incredible.

This is all about the issue of homeowners trying to modify their mortgages, asking their bank to help them stay out of foreclosure. A young widow desperately tried to modify her loan had her credit wrecked through no fault of her own.

"I was terrified," Helene Baymack said. "I didn't know if someone was going to come here and take my home?I have three small children."

Baymack is a single mother with a 2 year-old daughter and 7- and 8-year-old sons. She and her husband both had solid jobs in Web design and finance when they bought a sprawling Levittown, Long Island home with an adjustable rate mortgage.

"When he passed away, I was 4-months pregnant," she said.

Greg Baymack was just 32 when he died of colon cancer in 2006.

"I lost his income as well as him," Helene said. "Medical bills and house bills were piling up."

With the interest rate on her mortgage jumping to 10.75 percent, Helene said she appealed to her bank, Chase, to modify her loan. Then, she says, the notices started coming.

Baymack: "They said I was in defaul." Eyewitness News reporter Sarah Wallace: "But you were making payments." Baymack: "I was making payments...They'd say 'No, you haven't made your payments.' Then I'd speak to the modification department, and they'd say, 'We have to put them in a holding account. We have to put your money in a holding account.' What the heck is a holding account? Where's my mortgage money?" Wallace: "You had no idea they were putting this money in a miscellaneous account?" Baymack: "No. You think you would make your mortgage payment, it should go to your mortgage." Wallace: "Did they ever tell you they were doing that?" Baymack: "No." Wallace: "You had no idea this was happening?" Baymack: "No idea."

But she did get an idea what it was doing to her credit. Her credit reports showed she was in default.

"I'd go to use a card in a store, and then it would say, denied," she said. "My credit got completely destroyed. My credit appeared as if I was in foreclosure."

Helene says when she finally received statements about the unapplied funds, she got an answer from Chase she couldn't believe.

"They told me they put them into a holding account to appear as if I were going into foreclosure or they would not be able to adjust my rate," she said.

Many legal experts we've talked to say that banks won't even consider modifying a homeowner's mortgage if the person is not at least three months behind. Chase said that in Helene Baymack's case, they made a mistake and have now sent a letter to the credit reporting agencies to try and repair her credit.

And she did eventually get her loan modified to a lower interest rate, down to 5 percent for the next two years. But getting that credit fixed will take time.

"There should be a way they can modify your loan without destroying your credit," she said. "It fixes one aspect, but it destroys everything else."

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WEB PRODUCED BY: Bill King

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