Q: I’m in loan modification hell.

We supposedly “qualified” for the Making Home Affordable program, and our lender, Bank of America, gave us a new, modified payment. We supplied all the required documentation, etc, to our lender, and from what I have read everywhere, once you “qualify” and are given this new monthly payment, the one and only thing that you must do in order to make this a permanent arrangement is to make the (supposedly 3) trial payments on time.

We’ve not only made three on time payments, but a total of 16 of these “trial” loan payments. We constantly ask for updates and are told that we are “under review” and given the runaround.

Recently, we were told that we don’t “qualify” for a loan modification. We were not given a reason why but we were told that we could reapply. We did reapply and then we were told we didn’t qualify, because we could probably afford to make our “original” payments.

Now the problem is they are saying that we owe $50,000, when we should owe about half of that, and that the only solution is for us to get “current” on our account. We do have some money that we have saved up to pay the lender, but we don’t have $50,000 lying around.

When we told the lender that we don’t have that kind of cash, we received sarcastic answers, such as “have a garage sale” or “get a second mortgage” etc., as if these customer service people are purposefully pouring salt in the wound.

All we want are some answers to the following questions: We do we owe $50,000? Why did we not qualify for a permanent loan modification? If the modified payment is no longer an option, and we need to go back to the original payments, why will the bank not work with us on rolling whatever we owe back into the mortgage?

No one at Bank of America will help us with these questions. I read your advice to some similar cases, and you said to send a detailed complaint type of letter to the CEO/President of the mortgage company, and to also send copies to the Office of the Comptroller of the Currency, FDIC, and Treasury Dept. I did as you suggested, and sent letters out to the president of Bank of America and the OCC, but I couldn’t find the addresses for the Treasury dept and FDIC.

Do you have any advice?

A: Millions of lives have been ruined by one badly-designed and poorly run government loan modification after another.

Each week it seems, the government admits its current crop of loan modification programs hasn’t done the job, and has helped only a fraction of the intended recipients – then launches yet another new program.

Frankly, it’s a joke – and not a funny one. More than five million homes have gone into foreclosure since the housing crisis started, and nearly one-third of all homes with mortgages is “underwater,” or worth less than the loan amount. This hurts all homeowners, because those that can afford their mortgages have watched the value of their homes plummet, only to find themselves stuck with a property they can’t sell when they want.

With the latest numbers out this week, it’s clear that the housing industry in this country is in a Depression, not a Recession, with numbers that are extremely weak.

But back to your question: One of the biggest secrets in the loan modification process is that homeowners are not guaranteed a loan modification even if they are approved for a trial modification.

When the Making Home Affordable loan modification process was initiated, everyone was told what you understood: If you applied for a loan modification and were granted a trial modification, your trial period would be for three months. And, if you made your payments under the trial loan modification on time and for the right amounts, you could expect to receive the permanent loan modification.

That was a lie. Millions of homeowners were given trial loan modifications and made their trial payments on time but were later denied permanent loan modifications. Not only that, being in that trial loan period completely wrecked everyone’s credit – although the government said if you were making your payments on time before you went into the program, lenders would still report you as making on time payments. But it didn’t happen.

In reality, the manner in which lenders processed the Home Affordable Modification Program (HAMP) requests was to accept paperwork, give borrowers a trial modification, then evaluate the paperwork and make a determination whether the lender was better off granting the loan modification or taking their chances with a foreclosure of that borrower’s loan.

The way lenders actually worked the Home Affordable Modification Program explains why you didn’t get a permanent loan modification. Even if you qualified under any scenario, the lender still can evaluate the loan and decide whether it should grant the loan modification. It is a completely voluntary program for mortgage lenders.

While you might have been in loan modification hell for 16 or more months, you might be surprised to find out that your lender reported you to the credit reporting bureaus as not having met your mortgage obligations for those sixteen payment periods.

We have heard from many of our readers that lenders will automatically report borrowers as delinquent or as having paid less than required on their loans to the credit reporting bureaus.

Lenders must believe that the borrower has an obligation to pay the full amount due under the mortgage and that the trial modification does not change that obligation. So if a borrower owes a monthly payment of $1,000 but the trial modification lowers the monthly payment to $800, the borrower has failed to pay $200 that was owed.

In your case, you have been paying less than what was owed on your loan for 16 months. And, now the lender wants you to repay the shortage in addition to the penalty amount set forth in your loan for all of those short payments. Many loan documents provide that when a borrower fails to make his or her payments in full and on time, the lender can assess a late fee of about 5 percent on the payment that was due.

While we don’t know the specifics of your monthly mortgage payment or the amount you actually paid, your lender probably also has added other fees to your account if they also started foreclosure proceedings against you. Attorneys’ fees, late fees, and the interest that accrues on your loan and those fees adds up quickly.

It’s really a shame that the lenders have failed work with borrowers in their loan modifications and give them full disclosure of the effect that the loan modification process will have on their credit and how the lender will treat the borrower while in the trial loan modification.

We have forwarded your letter to a contact we have in the corporate offices of Bank of America to see if they can shed any light on your loan modification process. We hope that the bank will contact you to work something out so you don’t lose your home. Please let us know what happens.

Finally, you can file your complaint with the Office of the Comptroller of the Currency (OCC) at www.HelpWithMyBank.gov. You’ll see a link on the right side of the page in a blue box with directions on how to file a complaint.

The Unites States Treasury’s information is at www.treasury.gov. You should click the button on the toolbar labeled “Connect With Us.” On that page, you will find the Treasury’s address and phone number to call if you are having trouble with your lender in a loan modification in one of the Making Home Affordable programs.

Keep us posted.

UPDATE: Before we went to press, the reader was contacted by the executive office of Bank of America, and he reports they are trying to work out a solution to his problem with the bank.