In September my family and I lost a large portion of our income due to extenuating circumstances, and we were unable to make payments on our mortgage obligation. We notified our creditors and the credit bureaus to inform them of our situation. My complaint is that while we were in this situation we were never informed that there was a service called loss mitigation that could have aided us. We spent a lot of time and energy worrying and going around in circles, even having to seek government aid just to be denied. If you can imagine standing in front of the desk at a welfare office with your wife and children seeking temporary help just to be denied, that was a humiliating feeling that I never want my family and I to feel again.
Anyway, we contacted Citimortgage to get some advice, and the response was that we should contact our VA loan officer and that they could not do anything until we were three months behind. Meanwhile we were in touch with our VA loan officer, who offered advice, and we received information from Consumer Credit Counseling with suggestions to help our situation, which we followed, but to no avail. These were things we found on our own. When three months had passed, we got back in touch with Citimortgage and they treated us like second-class citizens. We found it difficult to reach them. There were no real reasonable suggestions provided that could help us in our situation.
This is the process for a VA foreclosure alternative or loss mitigation that should have taken place: 1) The servicer, in this case CitiMortgage, should obtain a written request and supporting documentation from the obligor. 2) Obtain a determination of insolvency from VA. 3) Determine the property value. 4) Evaluate VA's anticipated losses under the alternative and foreclosure. 5) Determine the need for and obtain (if necessary) a promissory note from the obligor. 6) Approve or disapprove the request. 7) Notify VA and the obligor of the decision in writing. 8) Process the alternative. 9) File a claim with VA.
This procedure was not followed and we were not informed that this service was available. The sad thing is that there are a lot of homeowners who may find themselves in a situation like ours and don't realize that they have an alternative. The banks know this, but because foreclosures are climbing at an alarming rate, many banks don't want to deal with the process of loss mitigation. Instead, a family may fall on misfortune and, instead of being helped, they are treated like trash.
Our situation was only temporary, but since we were unable to find help, and to save our home, we decided to file bankruptcy under Chapter 13, which was our last resort. The process was degrading and painful. I hope no one ever has to go through that. Since then I have been an educator on homeownership education and loss mitigation. I believe this is not an isolated incident, and that the banks that practice loss mitigation should be held liable for being negligent in following the procedure set forth by VA, FHA and conventional loans, since this can result in a homeowner filing bankruptcy.
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