Loan modification continue to be a carrot dangled in front of struggling homeowners, while the banks keep collecting their payments. The story below is just another sample of the failure of the program:
*******************************************************
Permanently modified home loans under the Obama administration's anti-foreclosure program rose by 4% to about 467,000 in September, according to a government report. But a watchdog said the program had dashed the hopes of many participating borrowers who wound up worse off.
The plan was aimed at lowering mortgage payments to keep millions of distressed borrowers in their homes, using funds from the $700-billion bank bailout program to reward lenders and borrowers for reaching permanent modification agreements. But it has proved less than a robust success.
Of the 1.37 million trial modifications started as of Sept. 30, about 700,000, or 51%, have washed out, the government reported Monday. And roughly 28,000 of about 495,000 so-called permanent modifications have been canceled as well.
What's more, many borrowers participating in the program complain that they are strung along for months by promises of permanent modifications that never come true. Some of these have sued lenders, as this Times story reports.
In a more than 300-page reportMonday, Neil Barofsky, the special inspector general for the bank bailout, described how borrowers had been offered hope in vain.
He said some borrowers have depleted their savings unnecessarily in trying to hang on to their homes. Others have been socked with huge fees and demands for back interest after having permanent modifications denied, he said, while others wind up with battered credit scores and less home equity.
Barofsky said that two other government programs to support housing had proved disappointing as well.
Only 342 households have benefited from a program that pays banks incentives for short sales -- the deals where the borrower satisfies the mortgage dent by selling the home for less than the mortgage amount, Barofsky said. And only 21 homeowners have received help in paying down second mortgages.
Tim Massad, an administration official spearheading the housing stabilization programs, defended them by saying the government has "redefined the loan modification standard for the mortgage industry overall." That has led to more than 3.5 million modifications under its program and others, Massad said.
One eye-catching fact from the loan-modification report: No. 1 mortgage customer-service provider Bank of America Corp. saw the number of its mortgages in permanent modifications actually fall, reporting about 79,000 such loans compared to 78,000 at the end of August.
In totaling up permanent modifications, the government is backing out borrowers who fall 90 days delinquent after receiving permanent modifications, plus the few who manage to sell their homes and any whose loans are moved to another servicer.
Spokesman Rick Simon said the decline in permanent modifications at BofA was artificial, caused by a change in internal procedures that held up the reporting of several thousand loans to the Treasury Department.
"We think we'll be back on the plus side going forward," Simon said. But he added that the trend would be toward "fewer gains" at BofA and the entire mortgage industry as the weak economy and job losses drag some borrowers back into delinquency even after their payments are lowered.
The other major mortgage customer-service providers -- Wells Fargo & Co., JPMorgan Chase & Co., Citigroup Inc., and GMAC Mortgage -- saw small increases in their number of permanently modified loans.
The banks say they are changing loan terms under their own in-house programs when borrowers can't qualify for modifications under the government 's Home Affordable Modification Program.
Bank of America, for example, said it has completed 700,000 mortgage modifications since January 2008, mostly to loans it acquired as part of its takeover of Calabasas' Countrywide Financial Corp. Of those, about 85,000 were completed as part of the Home Affordable Modification Program.
In an October 2008 settlement with California and other states, Bank of America agreed to reduce loan payments by billions of dollars to Countrywide borrowers who had subprime and pay-option mortgages.
The feds rolled out their loan-modification program the following spring.
By E. Scott Reckard, Los Angeles Times
October 26, 2010
Wednesday, November 17, 2010
Lawsuits accuse lenders of sabotaging mortgage modifications
Loan modification continue to be a carrot dangled in front of struggling homeowners, while the banks keep collecting their payments. Now homeowners have had enough, and they are fighting back:
*******************************************************
Financially strapped homeowners struggling to obtain mortgage modifications are taking their frustrations to court, accusing banks and loan servicers of misleading them or breaking promises to help them hold on to their homes.
The lawsuits go to what U.S. Housing and Urban Development Secretary Shaun Donovan has described as the heart of the government's anti-foreclosure efforts: ensuring that banks work in good faith from the start to help borrowers.
Although the foreclosure process is less complicated in California than in states where home seizures must be approved by judges, the litigation shows that borrower-servicer relationships can be contentious in the Golden State as well.
As controversy grew over the accuracy of foreclosure paperwork, Donovan last week said the Obama administration's top priority is "making sure that steps are being taken early in the process to keep people in their homes rather than only focusing on the steps that come late in the process, in which it's much less likely somebody will be able to stay in their homes."
A theme of the lawsuits filed by homeowners is that banks have denied permanent modifications to borrowers who make their payments on time and otherwise hold up their end of the agreements.
For example, Jean C. Wilcox of Irvine has sued EMC Mortgage Corp., accusing it of stringing her along for three years while making several offers to modify her nearly $800,000 loan, losing documents repeatedly and never intending to permanently change the terms of the mortgage. An EMC spokesman declined to comment.
"It was just 'extend and pretend,' " said Wilcox's lawyer, Anthony Lanza of Irvine. "And it was like they had the fax machine hooked up to a shredder."
Anaheim lawyer Damian Nassiri said his firm had filed about 100 lawsuits against mortgage lenders since 2007. Earlier suits alleged that lenders misrepresented terms of mortgages or engaged in other shady practices to foist abusive loans on borrowers. Most of his firm's suits now accuse lenders of dealing in bad faith with borrowers who have become delinquent on loans.
Worse, Nassiri said, in cases where foreclosure was inevitable, banks misled borrowers into accepting trial loan modifications. The intent, he claimed, was "to get some kind of money out of them" while stalling actions to seize the homes.
"There are too many bad loans for the banks to handle, and they can't dump all these properties out on the market all at once because we would have another Depression," Nassiri said.
Similar allegations of breaches of contract and acting in bad faith have cropped up in lawsuits around the nation, said Anthony Laura, a Washington lawyer who represents lenders accused of wrongdoing and tracks litigation trends.
Some suits allege that the problem is so widespread that courts should certify the plaintiffs as representing an entire class of aggrieved borrowers. Wilcox's suit, for example, seeks class-action status on behalf of other California borrowers with similar complaints about EMC.
Boston consumer lawyer Gary Klein, a longtime antagonist of mortgage lenders, has filed suits seeking class-action status against the top three loan servicers — Bank of America Corp., Wells Fargo & Co. and JPMorgan Chase & Co. — and others.
A multidistrict panel of federal judges on Oct. 8 consolidated eight such suits, including two from California, for pretrial proceedings in federal court in Boston.
The suits allege that trial loan modifications extended by Bank of America under the Obama administration's anti-foreclosure plan were contracts that the bank violated by denying permanent modifications to borrowers who fulfilled their obligations.
A spokeswoman for the Charlotte, N.C., bank declined to comment.
In court documents filed in one of the cases, Bank of America said the plaintiffs mistakenly believed they were guaranteed loan modifications if they made three trial payments under the government's program.
"A borrower must actually qualify, including income verification, an analysis of the modified loan's affordability and other factors," the bank said in the filings.
The loan-modification lawsuits add to enormous legal headaches for the banks.
The troubles include demands by mortgage giants Fannie Mae and Freddie Mac, Newport Beach bond fund goliath Pimco and the Federal Reserve Bank of New York that the banks repurchase billions of dollars in defaulted loans that were pooled to back mortgage securities.
On another legal front, several giant home lenders were forced to put evictions on hold this month after lawsuits turned up evidence that bank employees had signed thousands of court affidavits attesting that foreclosures were warranted — without reading the accompanying documentation.
Some analysts who follow mortgage lending said fixing that problem could be done with relative ease, as illustrated by Bank of America, the nation's largest loan servicer.
BofA issued a moratorium on pending foreclosures Oct. 1 but said last week that it had lifted the hold. The bank said it would resubmit legal affidavits, corrected where necessary, on 102,000 loans in the 23 states that require court approval for foreclosures and would resume asking judges for foreclosure orders.
Bank of America still has evictions on hold in 27 states that don't require court approval for foreclosures, including California, while it reviews its compliance with applicable laws.
But banks can't resolve so quickly the lawsuits they face over allegations that they lost or destroyed paperwork, failed to record payments or misapplied payments to run up fees and extra interest.
In the Wilcox case, for instance, EMC first modified her loan on a trial basis in late 2007 to lower its 8.34% interest rate, her lawsuit said, and she made the lower payments as agreed. But as time passed, she said, she was shuffled back and forth between numerous EMC employees, who kept changing the rules for a permanent modification.
EMC, which made so-called subprime loans as an arm of the collapsed Wall Street firm Bear Stearns Cos., is now a subsidiary of JPMorgan Chase. Chase spokesman Tom Kelly declined to comment.
Wilcox, a lawyer with expertise in real estate transactions, said she began having trouble paying the high-interest mortgage when her earnings as a sole practitioner slipped in 2007, leading her to seek a loan modification. She took a job at a law firm where her earnings are steady but lower.
Wilcox said that beginning in August 2008 she notified EMC four times in writing that she believed it was making false promises and demanded that it stop, laying the groundwork for one of the legal claims in her suit.
Wilcox's suit contends EMC was too buried in troubled loans to handle all the foreclosures at once. Instead, the lawsuit alleges, the company induced borrowers to accept trial loan modifications that it never intended to make permanent in order to keep payments coming in from the properties.
It also contends that EMC misapplied some payments and delayed the processing of others, intentionally inflating her balance with unjustified penalty fees and additional interest.
The company secretly recorded a notice of default as she was in the middle of her second trial modification, the suit alleges, and finally told her that her modification had been denied because an unidentified investor in her loan had refused to accept it.
The lawsuit alleges breach of contract, deceptive business practices and fraud. It seeks a court order requiring EMC to grant prompt modifications to qualified borrowers and compensate injured consumers.
Wilcox said she had about $250,000 in equity in her home when EMC first offered to modify her loan and would have sold the house had she not relied on the company's promises for a permanent modification. Now it's not clear whether any equity remains.
"You're paying out all this money," she said, "and all the time the value of your house keeps going down."
By E. Scott Reckard, Los Angeles Times
October 26, 2010
*******************************************************
Financially strapped homeowners struggling to obtain mortgage modifications are taking their frustrations to court, accusing banks and loan servicers of misleading them or breaking promises to help them hold on to their homes.
The lawsuits go to what U.S. Housing and Urban Development Secretary Shaun Donovan has described as the heart of the government's anti-foreclosure efforts: ensuring that banks work in good faith from the start to help borrowers.
Although the foreclosure process is less complicated in California than in states where home seizures must be approved by judges, the litigation shows that borrower-servicer relationships can be contentious in the Golden State as well.
As controversy grew over the accuracy of foreclosure paperwork, Donovan last week said the Obama administration's top priority is "making sure that steps are being taken early in the process to keep people in their homes rather than only focusing on the steps that come late in the process, in which it's much less likely somebody will be able to stay in their homes."
A theme of the lawsuits filed by homeowners is that banks have denied permanent modifications to borrowers who make their payments on time and otherwise hold up their end of the agreements.
For example, Jean C. Wilcox of Irvine has sued EMC Mortgage Corp., accusing it of stringing her along for three years while making several offers to modify her nearly $800,000 loan, losing documents repeatedly and never intending to permanently change the terms of the mortgage. An EMC spokesman declined to comment.
"It was just 'extend and pretend,' " said Wilcox's lawyer, Anthony Lanza of Irvine. "And it was like they had the fax machine hooked up to a shredder."
Anaheim lawyer Damian Nassiri said his firm had filed about 100 lawsuits against mortgage lenders since 2007. Earlier suits alleged that lenders misrepresented terms of mortgages or engaged in other shady practices to foist abusive loans on borrowers. Most of his firm's suits now accuse lenders of dealing in bad faith with borrowers who have become delinquent on loans.
Worse, Nassiri said, in cases where foreclosure was inevitable, banks misled borrowers into accepting trial loan modifications. The intent, he claimed, was "to get some kind of money out of them" while stalling actions to seize the homes.
"There are too many bad loans for the banks to handle, and they can't dump all these properties out on the market all at once because we would have another Depression," Nassiri said.
Similar allegations of breaches of contract and acting in bad faith have cropped up in lawsuits around the nation, said Anthony Laura, a Washington lawyer who represents lenders accused of wrongdoing and tracks litigation trends.
Some suits allege that the problem is so widespread that courts should certify the plaintiffs as representing an entire class of aggrieved borrowers. Wilcox's suit, for example, seeks class-action status on behalf of other California borrowers with similar complaints about EMC.
Boston consumer lawyer Gary Klein, a longtime antagonist of mortgage lenders, has filed suits seeking class-action status against the top three loan servicers — Bank of America Corp., Wells Fargo & Co. and JPMorgan Chase & Co. — and others.
A multidistrict panel of federal judges on Oct. 8 consolidated eight such suits, including two from California, for pretrial proceedings in federal court in Boston.
The suits allege that trial loan modifications extended by Bank of America under the Obama administration's anti-foreclosure plan were contracts that the bank violated by denying permanent modifications to borrowers who fulfilled their obligations.
A spokeswoman for the Charlotte, N.C., bank declined to comment.
In court documents filed in one of the cases, Bank of America said the plaintiffs mistakenly believed they were guaranteed loan modifications if they made three trial payments under the government's program.
"A borrower must actually qualify, including income verification, an analysis of the modified loan's affordability and other factors," the bank said in the filings.
The loan-modification lawsuits add to enormous legal headaches for the banks.
The troubles include demands by mortgage giants Fannie Mae and Freddie Mac, Newport Beach bond fund goliath Pimco and the Federal Reserve Bank of New York that the banks repurchase billions of dollars in defaulted loans that were pooled to back mortgage securities.
On another legal front, several giant home lenders were forced to put evictions on hold this month after lawsuits turned up evidence that bank employees had signed thousands of court affidavits attesting that foreclosures were warranted — without reading the accompanying documentation.
Some analysts who follow mortgage lending said fixing that problem could be done with relative ease, as illustrated by Bank of America, the nation's largest loan servicer.
BofA issued a moratorium on pending foreclosures Oct. 1 but said last week that it had lifted the hold. The bank said it would resubmit legal affidavits, corrected where necessary, on 102,000 loans in the 23 states that require court approval for foreclosures and would resume asking judges for foreclosure orders.
Bank of America still has evictions on hold in 27 states that don't require court approval for foreclosures, including California, while it reviews its compliance with applicable laws.
But banks can't resolve so quickly the lawsuits they face over allegations that they lost or destroyed paperwork, failed to record payments or misapplied payments to run up fees and extra interest.
In the Wilcox case, for instance, EMC first modified her loan on a trial basis in late 2007 to lower its 8.34% interest rate, her lawsuit said, and she made the lower payments as agreed. But as time passed, she said, she was shuffled back and forth between numerous EMC employees, who kept changing the rules for a permanent modification.
EMC, which made so-called subprime loans as an arm of the collapsed Wall Street firm Bear Stearns Cos., is now a subsidiary of JPMorgan Chase. Chase spokesman Tom Kelly declined to comment.
Wilcox, a lawyer with expertise in real estate transactions, said she began having trouble paying the high-interest mortgage when her earnings as a sole practitioner slipped in 2007, leading her to seek a loan modification. She took a job at a law firm where her earnings are steady but lower.
Wilcox said that beginning in August 2008 she notified EMC four times in writing that she believed it was making false promises and demanded that it stop, laying the groundwork for one of the legal claims in her suit.
Wilcox's suit contends EMC was too buried in troubled loans to handle all the foreclosures at once. Instead, the lawsuit alleges, the company induced borrowers to accept trial loan modifications that it never intended to make permanent in order to keep payments coming in from the properties.
It also contends that EMC misapplied some payments and delayed the processing of others, intentionally inflating her balance with unjustified penalty fees and additional interest.
The company secretly recorded a notice of default as she was in the middle of her second trial modification, the suit alleges, and finally told her that her modification had been denied because an unidentified investor in her loan had refused to accept it.
The lawsuit alleges breach of contract, deceptive business practices and fraud. It seeks a court order requiring EMC to grant prompt modifications to qualified borrowers and compensate injured consumers.
Wilcox said she had about $250,000 in equity in her home when EMC first offered to modify her loan and would have sold the house had she not relied on the company's promises for a permanent modification. Now it's not clear whether any equity remains.
"You're paying out all this money," she said, "and all the time the value of your house keeps going down."
By E. Scott Reckard, Los Angeles Times
October 26, 2010
Thursday, November 4, 2010
Another Loan Modification Failure
Another example of how bad the confusion and process for loan modification really is. The fact is, in Florida, only about 7% of loan modifications are successful. What is your Plan B, when you fall into the 93% group? Remember, attorneys can only delay and negotiate up to a point, at some point, you either have to start paying, or lose the house. Do attorney talk about default judgments? In my experience, most people tell me NO, their attorneys did not explain it. Who gets paid first when you hire an attorney? How much? How Long? Isn't it interesting to get the answers to these questions? Just some thoughts.
**********************************************************
Jill Gray of Mesquite, Texas, said her three-year-old son, Anthony, often tells her before he goes to bed: “I wanna go to the other house.”
Jill, Anthony and Tiffy, their black Labrador-mix dog, moved about 12 miles to a rental home three weeks ago after their one-story brick house in Garland was auctioned in a foreclosure. Gray, 38, tried for almost a year to get her mortgage modified, only to have the approval rescinded. Bank of America Corp. said documents were missing -- papers that Gray said she sent.
Gray’s experience, in which homeowners get evicted while participating in programs designed to avert foreclosures, is being repeated thousands of times at the biggest mortgage firms, according to groups that aid borrowers. The government’s Home Affordable Modification Program came under fire at hearings last week for “trial” arrangements that allow late fees and debts to stack up and documents to disappear, triggering seizures.
“Many homeowners end up facing foreclosure solely on the basis of the arrears accumulated during a trial modification,” said Julia Gordon, senior policy counsel at the Center for Responsible Lending, in Oct. 27 Congressional testimony. “One incomplete payment or one accounting mistake can land you on an apparently unstoppable conveyor belt to eviction.”
With as many as 7 million homes facing foreclosure or already taken, according to Zillow Inc., both the government and companies such as Bank of America and JPMorgan Chase & Co., the two biggest U.S. lenders, offered programs to forestall seizures by easing mortgage terms. Changes include cutting interest rates for as long as five years and extending repayment to 40 years.
More Payments
About half the 1.4 million temporary or “trial” modifications granted since the program’s March 2009 inception have been canceled, according to U.S. Treasury Department data. Only 466,708 borrowers have received permanent modifications. About one in five of the canceled modifications is either in foreclosure or bankruptcy, according to a Treasury survey of the nation’s eight largest mortgage servicers, which handle billing, collections and foreclosures.
Even borrowers who do win approval and never miss a payment can wind up in foreclosure, the Office of the Special Inspector General for the Troubled Asset Relief Program, or SIGTARP, said in an Oct. 26 report to Congress. “They may face back payments, penalties and even late fees that suddenly become due on their ‘modified’ mortgages and that they are unable to pay, thus resulting in the very loss of their homes that HAMP is meant to prevent,” the report said.
Lost Paperwork
Mortgage firms make the problem worse by losing paperwork, according to testimony from Richard Neiman, the New York State superintendent of banks. In a May and June survey of 40 counselors representing as many as 14,000 borrowers, the California Reinvestment Coalition found 100 percent said servicers had lost or ignored documents, according to associate director Kevin Stein, whose San Francisco organization works with low-income communities.
“It’s more common to hear that banks have lost paperwork than to hear that they received it and properly handled it,” said Joe Ridout, a spokesman for Consumer Action, an education and advocacy group based in San Francisco with a network of 9,000 community organizations nationwide.
That leaves HAMP participants vulnerable to foreclosure, a process that has been tainted by allegations of “robo- signing,” in which mortgage firms signed and submitted court documents to justify home seizures without verifying they were accurate. Attorneys general in all 50 states are investigating.
Treasury Responds
HAMP modifications reduce mortgage payments to 31 percent of a homeowner’s monthly gross income. The process often results in a larger mortgage as accrued interest and other charges are tacked onto the balance. Some HAMP modifications add so-called balloon payments to the loan that are due when a house is sold or the mortgage paid off.
“The program continues to perform well,” Andrea Risotto, a Treasury spokeswoman, said in a phone interview. “The target of affordability that HAMP put in place - this idea of 31 percent debt to income -- which was far more aggressive than what was done historically, is helping homeowners sustain the modification over time.”
Tom Kelly, a JPMorgan spokesman, said the New York-based lender is able to track paperwork because it scans every document as soon as it’s received. At Ally Financial Inc., spokeswoman Gina Proia said the Detroit-based lender requires homeowners to submit paperwork at the start of the modification process, leading to a “higher likelihood” of permanent modifications and lower re-default rates. Jumana Bauwens, a Bank of America spokeswoman, declined to comment on matters tied to lost paperwork.
Processing Fees
Richard Cormier, in Rialto, California, had made eight payments on a trial modification of his mortgage when Wells Fargo & Co. told him Oct. 12 his home was being auctioned at the end of the month. The San Francisco-based bank told Cormier his file was missing documents.
“Every time I try to do something they ask, it’s never right,” said Cormier, 56.
Tom Goyda, a spokesman at Wells Fargo, the biggest U.S. mortgage lender, said yesterday the modification will be approved. As of June, the company has started to assign one employee to handle a modification from start to finish so that a homeowner “knows who they’re working with,” Goyda said.
Under HAMP guidelines, final foreclosure sales are banned until 30 days after an applicant has received a notification of rejection. A sale can’t take place until servicers provide foreclosure attorneys with written certification that all modification efforts have been exhausted.
Delayed Responses
“Our normal policy is to continue with the foreclosure process while we review a customer for a loan modification,” Bank of America’s Bauwens said in an e-mailed statement. “If we have not finished our review, we will postpone the foreclosure sale automatically.”
Some lenders take as long as nine months to approve modifications, something that should take as little as 45 minutes, said Rick Rogers, an attorney in Bannockburn, Illinois, who represents borrowers. Witnesses at last week’s hearing pointed in part to understaffing.
“Lenders are overwhelmed,” Nathalie Martin, a professor at the University of New Mexico School of Law, in an interview. “A lender is duty-bound to hire enough people to be able to service their loans.”
Gray, the Texas mother, said she fell behind on her mortgage bills last year after paying for medical treatments for her son that weren’t covered by insurance. When her home was auctioned in September, there were no bidders, so it reverted to the mortgage holder, Mclean, Virginia-based Freddie Mac, taken over by the government in 2008. The house is now listed for sale at $55,000.
When Gray, a part-time Avon Products Inc. saleswoman, received the modification offer in December from Bank of America, based in Charlotte, North Carolina, she said she immediately signed and returned the contract using the supplied FedEx Corp. envelope.
Call Log
Bauwens said the bank didn’t receive it by the due date. For Gray’s three subsequent applications, she said she faxed copies of pay stubs and financial statements requested by the bank. Bauwens said the bank didn’t get key documents.
Gray kept a record of her calls to the bank, in addition to printed confirmations of documents she faxed. The log reads, in part: “Sept. 9: Called, was disconnected. Called again. Spoke to Christina. While transferred to supervisor I was disconnected. Called back. Ruby answered. She referred me to their REO Dept.”
HAMP conducts regular reviews of servicers as part of its Second Look compliance program that includes analyzing some files of homeowners who were denied modifications, said Risotto, the Treasury spokeswoman. If loans are under a Second Look review, foreclosure sales are suspended, and if reviewers conclude that servicers aren’t following guidelines, they may require applications to be re-evaluated, she said.
Gray is again being considered for a modification and the foreclosure sale may be rescinded, Bank of America’s Bauwens said. Gray, who works in the building permit department in a city called Fate, said she doesn’t expect to be approved. Now that she’s been evicted, she has to pay $775 a month in rent -- boosting her expenses beyond the program’s guidelines.
***********************************************
Another Interesting Article about Public Housing
**********************************************************
Jill Gray of Mesquite, Texas, said her three-year-old son, Anthony, often tells her before he goes to bed: “I wanna go to the other house.”
Jill, Anthony and Tiffy, their black Labrador-mix dog, moved about 12 miles to a rental home three weeks ago after their one-story brick house in Garland was auctioned in a foreclosure. Gray, 38, tried for almost a year to get her mortgage modified, only to have the approval rescinded. Bank of America Corp. said documents were missing -- papers that Gray said she sent.
Gray’s experience, in which homeowners get evicted while participating in programs designed to avert foreclosures, is being repeated thousands of times at the biggest mortgage firms, according to groups that aid borrowers. The government’s Home Affordable Modification Program came under fire at hearings last week for “trial” arrangements that allow late fees and debts to stack up and documents to disappear, triggering seizures.
“Many homeowners end up facing foreclosure solely on the basis of the arrears accumulated during a trial modification,” said Julia Gordon, senior policy counsel at the Center for Responsible Lending, in Oct. 27 Congressional testimony. “One incomplete payment or one accounting mistake can land you on an apparently unstoppable conveyor belt to eviction.”
With as many as 7 million homes facing foreclosure or already taken, according to Zillow Inc., both the government and companies such as Bank of America and JPMorgan Chase & Co., the two biggest U.S. lenders, offered programs to forestall seizures by easing mortgage terms. Changes include cutting interest rates for as long as five years and extending repayment to 40 years.
More Payments
About half the 1.4 million temporary or “trial” modifications granted since the program’s March 2009 inception have been canceled, according to U.S. Treasury Department data. Only 466,708 borrowers have received permanent modifications. About one in five of the canceled modifications is either in foreclosure or bankruptcy, according to a Treasury survey of the nation’s eight largest mortgage servicers, which handle billing, collections and foreclosures.
Even borrowers who do win approval and never miss a payment can wind up in foreclosure, the Office of the Special Inspector General for the Troubled Asset Relief Program, or SIGTARP, said in an Oct. 26 report to Congress. “They may face back payments, penalties and even late fees that suddenly become due on their ‘modified’ mortgages and that they are unable to pay, thus resulting in the very loss of their homes that HAMP is meant to prevent,” the report said.
Lost Paperwork
Mortgage firms make the problem worse by losing paperwork, according to testimony from Richard Neiman, the New York State superintendent of banks. In a May and June survey of 40 counselors representing as many as 14,000 borrowers, the California Reinvestment Coalition found 100 percent said servicers had lost or ignored documents, according to associate director Kevin Stein, whose San Francisco organization works with low-income communities.
“It’s more common to hear that banks have lost paperwork than to hear that they received it and properly handled it,” said Joe Ridout, a spokesman for Consumer Action, an education and advocacy group based in San Francisco with a network of 9,000 community organizations nationwide.
That leaves HAMP participants vulnerable to foreclosure, a process that has been tainted by allegations of “robo- signing,” in which mortgage firms signed and submitted court documents to justify home seizures without verifying they were accurate. Attorneys general in all 50 states are investigating.
Treasury Responds
HAMP modifications reduce mortgage payments to 31 percent of a homeowner’s monthly gross income. The process often results in a larger mortgage as accrued interest and other charges are tacked onto the balance. Some HAMP modifications add so-called balloon payments to the loan that are due when a house is sold or the mortgage paid off.
“The program continues to perform well,” Andrea Risotto, a Treasury spokeswoman, said in a phone interview. “The target of affordability that HAMP put in place - this idea of 31 percent debt to income -- which was far more aggressive than what was done historically, is helping homeowners sustain the modification over time.”
Tom Kelly, a JPMorgan spokesman, said the New York-based lender is able to track paperwork because it scans every document as soon as it’s received. At Ally Financial Inc., spokeswoman Gina Proia said the Detroit-based lender requires homeowners to submit paperwork at the start of the modification process, leading to a “higher likelihood” of permanent modifications and lower re-default rates. Jumana Bauwens, a Bank of America spokeswoman, declined to comment on matters tied to lost paperwork.
Processing Fees
Richard Cormier, in Rialto, California, had made eight payments on a trial modification of his mortgage when Wells Fargo & Co. told him Oct. 12 his home was being auctioned at the end of the month. The San Francisco-based bank told Cormier his file was missing documents.
“Every time I try to do something they ask, it’s never right,” said Cormier, 56.
Tom Goyda, a spokesman at Wells Fargo, the biggest U.S. mortgage lender, said yesterday the modification will be approved. As of June, the company has started to assign one employee to handle a modification from start to finish so that a homeowner “knows who they’re working with,” Goyda said.
Under HAMP guidelines, final foreclosure sales are banned until 30 days after an applicant has received a notification of rejection. A sale can’t take place until servicers provide foreclosure attorneys with written certification that all modification efforts have been exhausted.
Delayed Responses
“Our normal policy is to continue with the foreclosure process while we review a customer for a loan modification,” Bank of America’s Bauwens said in an e-mailed statement. “If we have not finished our review, we will postpone the foreclosure sale automatically.”
Some lenders take as long as nine months to approve modifications, something that should take as little as 45 minutes, said Rick Rogers, an attorney in Bannockburn, Illinois, who represents borrowers. Witnesses at last week’s hearing pointed in part to understaffing.
“Lenders are overwhelmed,” Nathalie Martin, a professor at the University of New Mexico School of Law, in an interview. “A lender is duty-bound to hire enough people to be able to service their loans.”
Gray, the Texas mother, said she fell behind on her mortgage bills last year after paying for medical treatments for her son that weren’t covered by insurance. When her home was auctioned in September, there were no bidders, so it reverted to the mortgage holder, Mclean, Virginia-based Freddie Mac, taken over by the government in 2008. The house is now listed for sale at $55,000.
When Gray, a part-time Avon Products Inc. saleswoman, received the modification offer in December from Bank of America, based in Charlotte, North Carolina, she said she immediately signed and returned the contract using the supplied FedEx Corp. envelope.
Call Log
Bauwens said the bank didn’t receive it by the due date. For Gray’s three subsequent applications, she said she faxed copies of pay stubs and financial statements requested by the bank. Bauwens said the bank didn’t get key documents.
Gray kept a record of her calls to the bank, in addition to printed confirmations of documents she faxed. The log reads, in part: “Sept. 9: Called, was disconnected. Called again. Spoke to Christina. While transferred to supervisor I was disconnected. Called back. Ruby answered. She referred me to their REO Dept.”
HAMP conducts regular reviews of servicers as part of its Second Look compliance program that includes analyzing some files of homeowners who were denied modifications, said Risotto, the Treasury spokeswoman. If loans are under a Second Look review, foreclosure sales are suspended, and if reviewers conclude that servicers aren’t following guidelines, they may require applications to be re-evaluated, she said.
Gray is again being considered for a modification and the foreclosure sale may be rescinded, Bank of America’s Bauwens said. Gray, who works in the building permit department in a city called Fate, said she doesn’t expect to be approved. Now that she’s been evicted, she has to pay $775 a month in rent -- boosting her expenses beyond the program’s guidelines.
***********************************************
Another Interesting Article about Public Housing
Subscribe to:
Posts (Atom)