CHICAGO (CBS) –- A local couple said they did what the bank told them to do—and now they are facing foreclosure on their home.
As CBS 2’s Kristyn Hartman reports, it has happened to hundreds of thousands of homeowners.
The house they were happy to build, is now a source of hurt for LaRae Alvarado and her husband. They are fighting their home mortgage default—and they say it isn’t their fault.
The couple was never behind on their payments, but they decided they wanted to refinance—looking for a better deal. At first, they didn’t qualify, but then they received loan modification paperwork in the mail and they decided to give it a shot.
With two kids, they hoped to put more money in their pockets.
They got a so-called “trial period plan” under the home affordable modification program with Bank of America to lower their $1,600 monthly mortgage. They showed CBS 2 a document that lowered their payment by $929.
Then came notification from the bank that they were behind on their mortgage.
So, LaRae Alvarado called.
“They said just continue. It is not going to affect your credit. You are not going to be fined,’’ she said. “That’s what they said over and over.”
“This is what I call duping into delinquency,” said DePaul finance professor Rebel Cole. “Where the mortgage provider actually encourages the borrower to go into default.”
Cole says it’s happened to 750,000 American households. Banks give people a trial period, but then kick them out because they don’t actually qualify for the permanent loan modification program.
LeRae learned it can end in foreclosure paperwork.
To top it off , the bank says she and her husband have to pay back what they saved in the trial.
They are refusing to do that.
In a statement, Bank of America says a home retention specialist will reach out to the Alvarados.
“We apologize to the Alvarados for this unfortunate situation and hope to have it resolved shortly,” the bank said in a statement.
The Alvarados refuse to accept their apology.
“I want them to fix this mess,” said LaRae Alvarado.