The uphill battle to get a loan modification
Few borrowers who get trial modifications are getting any permanent relief. Some of the blame lies with flaws in the program, but there are other obstacles.
Many homeowners desperate to save their homes face an uphill battle to get a loan modification. // © CJ Burton/Corbis
It has been almost two years since Danette Armstrong’s husband left her and she joined the millions of Americans fighting to hold on to their homes. Yet she’s still no closer to saving the Elk Grove, Calif., home she occupies with her two school-age kids.
Armstrong, 50, like many others, thought she was on her way to working out a modification with the company handling her loan.
She initially qualified under the Home Affordable Modification Program (HAMP) and paid the $1,620 payment her servicer stipulated (rather than the almost $3,000 payment she was making with her husband) for the several-month trial period outlined in the agreement. That was a couple of months ago, and she still has no permanent agreement to keep her house.
The foreclosure prevention program, designed to work through the millions of defaulted loans in this country, is flawed, analysts say, and will likely result in another huge wave of foreclosures hitting the market this year, despite moves by the Treasury to strengthen the program.
“There will be many foreclosed properties moving through the process and to a sale in the next six to 12 months,” says Mark Zandi, chief economist of Moody’s Economy.com. “It remains a significant threat to the recovery.”
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A drop in the bucket
Just 31,382 of the 728,000 borrowers undergoing a trial loan modification last year were converted to permanent status by the start of December 2009, according to Treasury Department figures released last month. Those numbers improved slightly in December with a year-to-date total of 66,000 loan modifications being accepted by borrowers, and an additional 46,000 mods being accepted, but not signed off on by the borrower.
Progress, to be sure, but it’s just a drop in the bucket of more than 3 million foreclosures expected in this country.
Indeed, the number of foreclosure filings continued to accelerate in December, according to data firm RealtyTrac, rising 14% from the previous month and 15% from December 2008.
These data, analysts say — coupled with the low percentage of modifications — highlight the problems with the program and the servicing companies participating in it.
Of course, servicers also face their share of problems qualifying distressed borrowers for HAMP. Some of the biggest reasons are:
- The borrowers are not currently living in their home or using it as a primary residence.
- They are unemployed or have lost a significant amount of income during the year.
- They already have an affordable payment that makes up less than 31% of their income.
Roadblocks and delays
Alexa Milton, ACORN Housing’s homeownership advocacy director, says that her group’s foreclosure-counseling clients have faced myriad problems with their modifications. (Learn about ACORN’s Stop Foreclosures Campaign here.)
“We are seeing a significant number of cases that have either delays, unnecessary roadblocks or fall apart entirely between the process of being approved for a trial mod and being approved for a permanent mod,” she says.
- Review backlog: Counselors say that servicers are telling many borrowers after the trial period that they are backed up in the review process and to keep making monthly payments equal to the trial until they can catch up — even as delinquency fees continue to accumulate.
- Repeat requests for the same paperwork: Distressed borrowers are asked repeatedly to send updated income documents, even if they have submitted full documentation to qualify for the modification trial.
- Record-keeping problems: Some borrowers have been told they were approved for a trial modification and began making payments, only to be told midway through that there was no record of any modification on their account and that they needed to reapply.
- Changing loan mod terms: And, less frequently, Milton says, clients are completing a three-month trial modification, only to be told that they will have a new trial period with higher payments.
Credit counselors and others in the loss mitigation business say there’s a host of reasons why foreclosure prevention efforts aren’t making more headway.
First, the loan servicing companies, hired by lenders and investors, are still not adequately equipped with the right staffing and internal systems and software to handle the huge number of distressed loans.
- MSN Money: Check mortgage rates near historic lows
“You are asking (servicers) to do the right thing and try to assemble the right documents” to move these through, says Joe Filoseta, president and CEO of DepotPoint, a company that provides loan-default servicing systems. “But in order to do that, you need people and you need to train them and there’s a time delay associated with getting them and training them to work in this world.”
That means, he says, that you have people with very little training being asked to handle complex tasks such as verifying different sources of income, including cash income, child support payments and other supplemental income not found on a W-2 form.
The short staffing and lack of organized systems also means that faxed documents and important customer contact data are getting lost and return calls are not being placed to the borrower in a timely fashion, Filoseta says.
“There’s a lot of blood on the floor. These people are making their trial mods and their calls are not being returned,” he says.
I have been dealing with citi-mortgage for almost 16 months now. My Industry collapsed, (marine industry) and just when it was coming back the BP oil spill hit and I list 150k in guaranteed income because they shut down the federal waterways. I pulled my britches up and put my boots on and made things happen, Citi-mortgage started foreclosure proceedings after 4 months, I met them in court (no attorney) got the judge to send us to mediation, (all I wanted was them to reinstate my loan and I would pay the arrearages over 6-months and make my current payment) there attorney in mediation through out there 260k in compounded daily interest (6.5% 30 year fixed) and said I needed to pay that and they would reinstate my loan. I said in mediation kiss my ****, told there lawyer apparently he has never had anyone slap the sh#t out of him, because i was the guy that would do it. Needless to say mediation broke down , I since hired an attorney for 14 months still trying to get this matter settled. No answers, no return phone calls, it's a mess, and all I want is my loan back at 6.5%. I'll pay the arrearages over 9-months now because I refuse to pay until they give me a guarantee. ALL I'M GOING TO SAY IS THIS, IF THEY DO NOT GIVE ME MY LOAN BACK AND PROCEED WITH THIS FORECLOSURE CRAP, I'M GOING TO PERSONALLY CUT DOWN 70 100 YEAR OLD OAK TREES , RIP OUT THE 30K ADDITION I ADDED OUT OF MY POCKET OUT, SHEET ROCK AND TILE AND ALL. BY THE WAY I GREW UP ON AN 800 TREE PECAN FARM SO I'M VERY CRAFTY WITH A CHAINSAW.
The Banks are't moving on these because they want the interest rates to rise first. They want to recover the money they are losing through the modifications over time.
The longer this turn around takes the more people will get discouraged with the loss of equity and value, and just toss their keys on the garage floor and walk.
The Lenders need to allow people with less than 80% loan to value, say 50%, refinance at the current low rates. Lets start to reward Home Ownership and reward those who have tried to stick it out.
I know people who put 20% down, financed for 30 years and did everything right. They bought into new developments and didn't realize the Developers and Banks were allowing people to buy in with little of their own money, and adjustable rate loans. Of course when the market turned those with little investment were walking and this caused the current crisis.
Loan Modifications are available for temporary help. It was never intended to replace homeowner original agreement. Welfare was not intended to be a permanent source of income for people. If homeowner are seeking permanent changes to their mortgages, they need to refinance. I am tried of reading stories like this implying that some injustice has been done. I believe stories like this send the wrong message to people. It gives the impression the government should provide a change on legally binding housing contract. LOAN MODIFICATION ARE TEMPORARY AGREEMENTS. The purpose of loan modification is to provide help to people for a short period of time. IF HOMEOWNERS WANT PERMANENT CHANGES TO THEIR MORTGAGE THEY NEED TO REFINANCE THEIR MORTGAGE! THE BANKS AND MORTGAGE COMPANY ARE ALSO OVERWHELMED BY PEOPLE SEEKING MODIFICATION THAT DON'T NEED THEM. Everyone applying for a loan modification is not a distressed homeowner. All foreclosures are not owner occupied homes. You need to do more articles on refinancing and home buying. Articles like this one just keep homeowner fearful and property values down!
All the government has to do is make the banks have to keep the property taxes current on any home that the bank has taken over from foreclosure. If they had to do this(like anyone else has to pay if they own property) you would see the bank move allot quicker to help homeowners out. They have no reason to help. They don't have to pay the property tax, that gets adjusted by the person who buys the foreclosed house. They are making tons of money just letting the government money they were given to help in the modification process just collect interest. So if they just keep that money in the bank and collect the interest, keep asking people to produce the same papers over and over again they make a hefty sum every month. If they started to lose money by not helping people, because they had to keep the property taxes current, you would see new action happen. Then they would not be making the huge profits they have been. Government wake up.
All Banks are the same. Like any other business, their purpose is to make money. What really got us into this mess was their fraudulent ways of getting everybody approved for a loan, even if one did not qualify or made enough money to repay it. It is a shame to see our fellow Americans struggling to survive, yet the Banks get richer by the minute with our sweat and efforts. If we continue this trend, I am afraid our beloved Country will collapse entirely. We are going to go from being the biggest economy in the world to the smallest. There is only going to be a high class and the poor. Just like in France, back in the days of the French revolution, when the poor started to hate the rich, because they could not longer survive. What a shame. God bless America!
Get yourself a Real Estate Lawyer to defend your side of the loan, the banks have the best money can buy.
There is an attorney out of Los Angeles with 32 years in RE Law - first name Eugene - find him through CA Bar. Anyway for $3200.00 it is well worth the price to protect your investment. You don't need to visit the office in LA, just phone and a fax will work. I'm pretty sure they service every state in the USA.
Anyway don't be surprised if this process lasts over a year trying to do it on your own. I spent 4 months, 100's of phone calls, sent letters, check stubs, personal financial to no avail and how this changed from one day to the next when the attorney got involved. The funny part was once the bank knew the lawyer was representing us, they wanted me to continue dealing with them and began to call me regularly. I referred them to the attorney every time.
With the assistance of the law firm, our principle was lowered by $100K, the arrears tacked on to the loan amount. Monthly payments lowered by $1000 temporarily for a few years, and in 2014 it will go up to $3000 with a 30yr fixed for 5.5% and we are happy with these terms.
Has anyone run into a problem with getting the necessary comps to refinance? My daughter and her boyfriend bought a piece of property and financed the house in separate loans. You guessed it. They broke up, and my daughter is left holding two payments. The house was finished when the bottom fell out. She is trying to combine the two loans into one, and the biggest obstacle seems to be "no comps" for this piece of rural property. If anyone has found a way to navigate this one, would love your input. Thanks
Hi there, since losing job I have been trying to work with Wells Fargo and I know how absolutely frustrating it can be. Filled out paper work 3 times and still waiting. 6 months ago the told me I didn't have to make mortgage payments for 6 months and to use that money to pay down other debt. 6 months go by and then they told be I owed 6 months worth of back payments and they were started the foreclosure process!!I wasn't late on any payments when the told me not to make the payments. Now we have late fees ...etc And if they don't modify the loan we will now lose the house due the the fact they now want the 6 months of payments I was told by them not to make. What kind of scam are the throwing at me??? At wits end. I just wish I could go and sit down with someone at Wells Fargo rather then do this all over the phone. Would be nice to talk to the same person each time rather then have to explain the situation over and over agin to a new person online. GOD help us
the word martgage mortis means DEATH and gage means GRIP from the greek.
this meltdown was a well laid plan,go to youtube and type( Systemic Wall Street fraud) it was on PBS after watching you will have a real understanding just how bad these banksters are.
www.AboutYourMortgage.com: This is a great site that is somewhat geared towards aiding you to handle your own loan modification. Their service is at no cost to the homeowner.
www.ShortSaleLiveChat.com: They are not a loan modification company... but do offer some sound advice for those homeowners trying to figure out what they should know about the company they seek assistance from. This site offers free LiveChat with experts that help you to better understand your options.
I work for a 30 year real estate law firm helping home owners, we stopped processing Modifications for our customers. The results are not in our customer's best interest. We now sue the pants off them, civil litigation works, our customers are getting reduced payments, there land free and clear, and keeping them in the property years after the lender tries to foreclose.
A MOD is begging for help. We are forcing the lender to help you.
I feel for anyone trying to get a lender to do anything, let a lone get them to give up a dime or penny.
They drag these out months in hope you will give up, your income gets worse, or they can figure our how to charge more by legal fees ect......
We should not have to beg for help.
Stop begging for help ..... Demand Your Rights....
God be with you....