The Homeowner and The Big Bank: A Loan Modification Fable

Las Vegas Loan Modifications.

A fable according to Webster’s Dictionary is “a fictitious story meant to teach a moral lesson”.  Aesop is the best known fable writer and most of us are familiar with his stories such as “The Tortoise and The Hare”. A lesser known fable is “The Wolf and The Crane”.  For the purpose of my fable, the leading roles will be played by The Homeowner (the Crane) and The Big Bad Bank (the Wolf).

The homeowner purchased her home at the height of the Las Vegas boom.  She scraped together her down payment and stretched her budget to the max.  Times were good and it seemed like the right way to go before the prices got higher and homes were out of her reach.  She was able to afford a $250,000 home.  Her mortgage was adjustable and the payment barely affordable, but with both her and her husband’s salaries, they could make it.  Of course, her credit was spotless.  The American dream was realized.

After they settled into their home, they worked hard on finishing it with backyard landscaping, a covered patio, and all the things they felt they needed to make it a home.  Things were going great.  Then, WHAM! Las Vegas was changing- times were tough, business was off, and consequently, her husband was laid off.  She was lucky – she had a great boss who cut everything else but kept her at her current salary.  In addition to her husband’s layoff, her loan rate adjusted and her payment went up.  Her neighbors also hit on hard times and abandoned their homes.  The average $250,000 price in her neighborhood dropped to $95,000.

She was in a quandary.  Should she join the group of neighbors and go into foreclosure or try to do the “right thing”?  She had heard about this new thing called a “loan modification”.  She contacted The Big Bad Bank and the process began.  She filled out all the paperwork and had the right qualifications.  It looked like a sure thing.

After several months, lo and behold, her loan modification was approved!  Her payment was reduced $500!!  Now, remember her loan period was extended another ten years, but it still seemed like the right thing to do.  She began to pay the lower payment as they instructed.  Being a vigilant person with regard to her credit, she decided to check her credit report after three months.  The Big Bad Bank had reported her late to the credit bureau THREE TIMES!

When she called, she was told that her loan modification was a “trial” or “temporary” modification.  She said, “But I paid what you asked!”  The Big Bad Bank said, “But you paid less than your original agreement.  We accepted it but it was not what you agreed to when you bought the house.”  The homeowner is disputing the late payments with the credit bureau and is hoping for the best.

This homeowner was trying to do the right thing.  The moral of the fable “The Wolf and The Crane” is “In serving the wicked, expect no reward, and be thankful if you escape injury for your pains”.  The moral of my story is “When you try to do the right thing, the wolf still may eat you”.

By the way, This story is NOT fiction…