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Question: About 4 years ago I received a loan modification on my mortgage loan when the original balloon payment came due. I am current on my payments. However, the bank charged off the loan. When I inquired I was told that the bank did not have any record of the modification and charged the loan off because the value of the property is less than the loan balance. Is what they are doing legal? Can I make the collection calls and letters stop? I am continuing to make payments on time and for the full amount of the original monthly payment amount. Per my online statement 100% of the payment is going towards the charged off amount.

Answer: If you have an executed loan modification, it is binding whether or not the bank can find its copy.

Whether a loan can be declared to be in default because the value of the collateral has declined depends on the terms of the note, but most likely the answer is “no.”

Check your credit reports to see if the loan is being reported as in default or charged off.

If so, send a letter to the 3 credit bureaus explaining that the bank has failed to honor a modification and that you have made all of your payments, enclosing a copy of the modification, with a copy to the bank.

Whether or not it is on your credit reports, send a similar letter to the bank with your name, loan number, and the statement “qualified written request/ notice of error.” Include a copy of the modification and ask why it is not being honored. Specifically ask that the calls stop. Also specifically ask for what authorized the bank to charge off the loan.

Send a similar letter each time you receive a statement, notice of default, or other document from the bank that contains any error. Specifically refer to the new correspondence from the bank by date and type.

If the matter is not cleared up within 30 days, you should file suit. There are several consumer protection laws that the bank appears to be violating.

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