Jeff Gelles: A mortgage modification beset by shifting rules

Lisa Fiorilli at home. A bank official said she was ineligible first for earning too little, but now earns too much.

If Lisa Fiorilli were a contestant on Let's Make a Deal, Bank of America's latest offer might have made a little more sense to her.

Behind curtain 1 would be a mortgage-loan modification - with few details beyond what it will cost to claim it: $1,513 a month for the next three months. Pay the first installment by Thursday, the bank says, or lose out.

And behind curtains 2 and 3?

Maybe the mortgage modification she thought she was getting last year, under the federal Home Affordable Modification Program (HAMP), with a monthly payment half that size. Or maybe a court summons for a foreclosure proceeding on the Manayunk rowhouse Fiorilli has called home for a decade.

The trouble is, of course, that the fight to keep a home isn't a game. Even if every story differs in detail, it's been a deadly serious struggle for millions of American homeowners since the 2008 financial crisis and economic collapse.

Yes, some are suffering from their own misjudgments as well as bad luck - "the losers," in Rick Santelli's memorable phrase from the February 2009 rant that gave rise to the Tea Party. But most are also victims of the misdeeds of mortgage lenders, Wall Street financiers, and others who helped fuel the last decade's housing bubble - contributors to a slow-motion train wreck that continues to spread pain.

You may remember reading here in July about Fiorilli's troubles. Starting in early 2010, she made 13 monthly payments to Bank of America in hopes of getting a permanent HAMP modification for her mortgage. But what Bank of America dangled it then snatched away, for what seemed to be the flimsiest of reasons.

After Bank of America started rejecting her payments, one employee told her she'd defaulted on the trial because of a phone payment that came in 35 cents short. Another dismissed that notion but said she'd been dropped because her initial payment arrived too early, before the trial had actually begun - even though Fiorilli had received two letters urging her to start paying immediately.

Bank of America spokeswoman Jumana Bauwens acknowledged in July that something had gone awry. "It's obvious that she hasn't received the level of service from Bank of America that she should have," Bauwens told me, promising to look into the case.

I caught up with Bauwens again Friday to ask about Bank of America's new offer to Fiorilli, and also about Fiorilli's strange inability to get basic details about the offer - including, say, the interest rate - from her new "single point of contact" with the bank.

That single contact was one of the key customer-service improvements promised earlier this year by Bank of America and four other mega-banks when they agreed to pay more than $25 billion to settle claims by federal officials and 49 states that had sued over practices such as the "robo-signing" of foreclosure documents.

Like Fiorilli, many borrowers had complained about getting conflicting and ever-changing information when they called mortgage servicers. Fiorilli has, indeed, found her point person helpful - or did, until the new offer.

Bauwens' explanation: Fiorilli's contact was unable to answer questions about the offer because Fiorilli is now represented by a lawyer - even though Fiorilli's lawyer, Matthew Weisberg, said he generally leaves such discussions to his clients. "My clients know their own finances better than me," he told me last week.

But Bauwens did provide some details about the new modification being considered for Fiorilli - a program offered not under the Treasury Department's HAMP but directly by Freddie Mac, which owns her mortgage.

HAMP offers incentives to lenders for modifying loans. To reduce monthly payments to 31 percent of a borrower's gross income, the lender can cut the interest rate to 2 percent, extend the term to 40 years, and delay repayment of a portion of the loan until a balloon payment at the end.

The Freddie Mac program isn't quite as attractive. Bauwens said the offer to Fiorilli - if it comes through as anticipated after her three trial payments - would cut her rate to 4.625 percent and extend its term to 40 years.

Is it a good deal? "It's almost 3 percentage points below the rate she has now," Bauwens said.

All along, Fiorilli has asked a simple question: If she was offered a trial modification and met the terms with her 13 monthly payments starting back in 2010, why wasn't she entitled to a permanent version? "I can't allow them to take my home because they made a mistake," she said in July.

Bauwens said the answer is tied up in the ups and downs of Fiorilli's finances. And it's true that, like others caught in the mortgage mess, Fiorilli has her own personal story of boom and bust.

She was laid off in early 2009, at the nadir of the economic crisis when hundreds of thousands of Americans were losing jobs each month. At the time, she was a short way into a $225,000, 30-year loan on a house appraised near $300,000 - more than twice what she paid for it, albeit before she did some major renovations.

After nearly two years she went back to work as a business consultant, and has been rebuilding her finances. Ironically, Bauwens said Fiorilli was ultimately refused for her initial HAMP modification - despite all the talk about her early payment or 35-cent shortfall - because she didn't make enough money to meet the formula. Now she makes too much to qualify.

"If someone's income shifts, or something else changes, you have to start the whole process over," she said.

If the new terms are affordable, is this a case of no harm, no foul?

Not according to Alys Cohen, an attorney at the National Consumer Law Center.

"It raises two questions," Cohen said. "Why couldn't this all have been done much earlier, and without so much heartache? And how much did her balance go up during that time - what happens with all that accumulated interest? She owes more because they took so long. And that's fundamentally unfair."

Fiorilli is grateful to have another chance at a loan modification. But on that last point, she wholeheartedly agrees.


Contact Jeff Gelles at 215-854-2776 or