Consumer complaint received 2021-09-17
Product: Mortgage — VA mortgage
Issue: Struggling to pay mortgage — 
Company: Flagstar Bank, N.A. (CA)

This complaint/letter serves as an appeal of the denial by Flagstar bank of our application for loss mitigation. Although we have been supplied insufficient information to provide a complete appeal, this letter serves as our best effort given the current situation. We submitted 43 pages of documentation in our loss mitigation application, beginning on XX/XX/XXXX. This process took hours of work, and multiple phone calls to the Flagstar customer support/hardship task force line to work this process out. The online application was incorrectly entering a date, so we were instructed to print and manually file the paperwork, then upload it to the portal which we did. I called to follow up, and was notified at that time verbally ( Friday XX/XX/XXXX ) that more documentation was needed. We completed this other documentation and uploaded on the portal Saturday XX/XX/XXXX. 

On Tuesday XX/XX/XXXX I again called to validate that all documentation was received and was in proper order. It was at this time that I was notified that our application had been denied, and informed that I had the option to appeal. I requested the reason for denial and was told VA has denied you because you did not make 12 payments. I requested the documentation of the denial so that I could form my appeal. The agent told me it would be in the mail, but that I needed to be quick because I only had 14 days to appeal. I requested escalation to a manager/supervisor and was told someone would call me back within 24-48 hours. 

The following morning ( Wednesday XX/XX/XXXX ) I received a call from XXXX, an escalation manager by his description. XXXX was short and confrontational from the start of our conversation, and I became upset. I specifically asked for clarification about what options are available to us as VA loan holders, because VA has provided specific guidance for new programs specific to the COVID 19 situation, to support veterans retaining their home and coming out of forbearance successfully. By this time, I had researched VA loan seasoning requirements and found out that VA does not require 12 months of payments, but only 6 months of payments + 210 days elapsed since the first payment of the loan ( see references VA XXXX XXXX0-25 & 26/20/25 Change 1, as well as Public Law NO : 116-33, related to Senate Bill 1749 Protecting Affordable Mortages for Veterans Act of 2019. ) We did make 7 full payments on XX/XX/XXXX, XX/XX/XXXX, XX/XX/XXXX, XX/XX/XXXX, XX/XX/XXXX, XX/XX/XXXX, XX/XX/XXXX to our previous servicer, XXXX XXXX, before electing COVID 19 Forbearance due to my wife not being able to work as an elementary school teacher due to the requirement that our school age children be at home. 

I requested XXXX to provide me in writing the reasons for denial, and he said XXXX would not be doing that. I asked how I could appeal, without seeing the denial reasoning in writing, and he repeatedly refused to assist. He repeatedly stated that VA had been the party to deny me on the application, and this is either an outright lie or misdirection, as VA circular 26-21-13 ( the COVID-19 Home Retention Waterfall and COVID-19 Refund Modification ) clearly states in the circular that VA prior approval for multiple programs ( including the new VAPCP and COVID-19 Refund Modification ) is not required. Flagstar stating both that VA issued the denial and that the reasoning is that the loan is not-seasoned by failing to complete 12 payments is clearly at error.

Through all of this time, I have been told repeated that information regarding our appeal has been mailed to us, but not one piece of mail has been received regarding this application. I finally got transferred to Flagstar customer support team, where after 50 minutes on hold I received a pdf document by email from customer support agent XXXX XXXX. This document includes 88 total pages, including our full Loss Mitigation App, the full credit reports for both myself and my wife, and only 3 pages of an obviously clipped email chain from Loss Mitigation Underwriter XXXX XXXX XXXX to an XXXX Support. The entirety of that email chain includes no helpful information whatsoever, with regard to this appeal. The subject line of the email reads : # XXXX XXXX VA denial ( there is either no body of this email or it was removed in this document ), with a reply by XXXX Support stating : Hello, Please correct/review the following before proceeding and send back the entire audit file to XXXX Support for the " proceed '' email after the corrections have been made : If you hit forward instead of reply to this email it will keep the audit file attached Loans/Debt Installment amount incorrect. 

Thank you Followed by a reply by Loss Mitigation Underwriter XXXX XXXX XXXX of only Correction made and a final reply from XXXX Support stating : The loan has been reviewed for special servicing and the outcome remains the same. Please proceed with the denial. 

The documentation of our credit shows our credit-worthiness, with credit scores of XXXX & XXXX for myself and my wife, respectively. That we apparently do not qualify for any program is insulting, and I am left truly wondering about the average veteran, that has neither the time nor the skills able to research and appeal like I am currently. This being all that is provided to the borrower ( and that I had to dig for hours to even receive ) is clearly purposefully opaque so as to keep the borrower misinformed about both the process, and any way to find a path forward to the satisfaction of the borrower. 

Since this appeal is not fully informed, I am considering retaining of counsel if this process does improve. In my reading of the situation, Flagstar bank as the servicer of my VA loan is clearly not following the COVID-19 Home Retention Waterfall, which circular 26-21-13 clearly states : To help servicers apply VAs preferred order of home retention options when assisting borrowers affected by the COVID-19 pandemic, VA has developed the COVID-19 Home Retention Waterfall. ***Services are to follow this waterfall, choosing appropriate options based on borrowers self-assessment of their ability to resume regular payments on a VA-guaranteed loan and to repay amounts missed under a COVID-19 forbearance. *** ( emphasis mine ) VA has done an excellent job outlining its preferred method to get Veterans back on the proper path with respect to home ownership through these programs. Flagstars escalation manager finally told me ( after much cajoling ) that Flagstar is refusing to offer their borrowers the programs recently released by VA, such as the COVID-VAPCP or COVID-19 Refund Modification. It is my belief that Flagstar has deliberately chosen this path because they prefer to fully capitalized the arrears in their own modification, install a trial plan ( see reference to other CFPB complaints related by Flagstar customers at CFPB Complaints # XXXX, XXXX, XXXX, XXXX, XXXX, XXXX, XXXX, XXXX. These are only the complaints that are publicly available and that are related to COVID-19 forbearance and loan modification for VA loans ) and not find the option in the best financial interest of Veterans. This is clearly out of line with the intent of VA Circulars 26-20-25 & 26-21-13. While I do understand Flagstar is not required to offer COVID-VAPCP as an option to borrowers, I believe Flagstar is purposefully obfuscating the process of ending a forbearance for it to maximize its profit, rather than enabling Veterans to retain their homes, successfully and within their financial means. 

In summation : I request formal, written documentation of all reasons for denial of loss mitigation. 

I request that Flagstar review Circular 26-21-13 that provides the proper COVID-19 Home Retention Waterfall for VA loans , that Flagstar proceed using this VA-outlined process, and do so in good faith.

I request written proof of VA denial of prior approval. The verbal references to VA denying my application are either a lie, or purposefully misdirection of blame from Flagstar to VA. VA is clearly not requiring VA prior approval for numerous options, not just COVID-VAPCP and COVID-19 Refund Modifications.

I request that Flagstar do consider these programs ( COVID-VAPCP and COVID-19 Refund Modifications ), under which Flagstar can both capitalize arrears ( receiving liquid cashflow from VA ) as well as receive VAs usual financial incentive for having completed a successful loan modification.

I request that Flagstar review loan seasoning requirements for VA loans, and if my understanding is correct, provide written proof of training supplied to Flagstar customer support and Hardship Taskforce staff that 12 months of payments is not the true requirement for consideration of modification, but 6 months of payments + 210 elapsed since the due date of the first payment, consistent with Public Law No : 116-33, Protecting Affordable Mortgages for Veterans Act of 2019. Flagstar should use the proper 6 month +210 rule, for which we qualify after completing 7 payments to XXXX XXXX  on XXXX, XX/XX/XXXX, XX/XX/XXXX, XX/XX/XXXX, XX/XX/XXXX, XX/XX/XXXX, XX/XX/XXXX. 

I request that Flagstar provide documentation for where the 12 months of payments rule is coming from. Clearly, Flagstar call center staff have been trained that this is a requirement for consideration. That appears to be false, if Im understanding the law. If Flagstar is intentionally misleading borrowers, Consumer Financial Protection Bureau, Department of Veterans Affairs, and California Department of Business Oversight and California Bureau of Real Estate should investigate Flagstar bank for misleading practices, and review how many Veterans have been misinformed and received undue economic harm as a result of receiving bad information from Flagstar, clearly because it is in the financial interest of Flagstar Bank.

I request CFPB ( and/or other proper regulatory agencies ) review Flagstar Bank policies because of the clear trend of negative behavior of their customers, with particular attention to how Veterans have been treated unfairly. The previously mentioned CFPB complaints are all related to an opaque, difficult process that Flagstar is operating. Given the current environment related to these loans, some difficulty in managing this modification process at this time is predictable and understandable. Flagstars process, standards, training and resultant advice of its call staff is woefully inappropriate, at best, and possibly purposefully obtuse or negligent of the intent of the law.

References Veterans Benefits Administration Circular 26-20-25, June 30, 2020 XXXX XXXXXXXX Veterans Benefits Administration Circular 26-20-25 Change 1, September 15, 2020 XXXX XXXX XXXX Senate Bill 1749, Protecting Affordable Mortgages for Veterans Act of 2019, became public law on 7/25/2019 XXXX XXXX XXXXXXXX Consumer Financial Protection Bureau Complaints above referenced : XXXX XXXX XXXX : XXXX # XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXXXXX