The foreclosed home listing prevention program under the Obama administration is now showing another crushing point.

Borrowers in California are now finding out that there is a waiver in their loan modification contracts allowing lenders to pursue foreclosure proceedings on their modified mortgages without first notifying borrowers.

The standard Home Affordable Modification Program document, which is used by all lenders, states that the foreclosure action may be resumed after the HAMP term ends and that borrowers waive their rights to notices of default, notices of foreclosure or other notices concerning the resumption of the foreclosure action after the termination of the HAMP plan.

In response to the complaint about the waiver portion of the trial modification document, Treasury spokesperson Meg Reilly explained that the same document states that lenders cannot resume or restart their foreclosure actions if borrowers have not failed during the trial HAMP period and they have not been found to be ineligible for other foreclosure prevention schemes.

One case that illustrates the impact of the application of the HAMP waiver was that of Evangelina Flores, a borrower in Fontanta, California who has participated in the federal foreclosed home listing prevention program.

Flores paid all her modified monthly amortization of $1,134.60 and completed her trial modification. Her lender, Central Mortgage Company, informed her that her adjustable-rate loan, which had increased to a monthly payment of more than $2,000, would be modified to a fixed-rate loan. Flores then sent her next monthly payment.

To her surprise, two people informed her the next day that she is up for eviction and that her house has been sold to Shark Investments. Based on public records, her house, which she purchased for $352,000 in 2006, is now valued at only $99,000. But the new owners purchased it for only $78,000 at a foreclosure auction that she did not know about.

The trial modification document from Central Mortgage Company offered comforting words, including the promise to help the homeowner explore other options if the trial modification fails. But it turned out the promise was not to be believed.

Central Mortgage is owned by Akansas-based Arvest Bank, which is controlled by Wal-Mart heir Jim Walton.

The lawyers working for free for troubled homeowner Flores have filed a case to fight the eviction. They argued that Flores had qualified for the federal foreclosed home listing prevention program and that she was supposed to get her loan modification notice this December.

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