WASHINGTON — Though lenders are boosting their attempts to curb record-high home foreclosures, fewer than half of loan modifications made at the end of last year actually reduced borrowers' payments by more than 10 percent, data released Friday show.

The report, based on an analysis of nearly 35 million loans worth more than $6 trillion, was published by the federal Office of the Comptroller of the Currency and the Office of Thrift Supervision. It provides the most detailed and broad analysis to date of efforts to stem the foreclosure crisis, which President Barack Obama is trying to combat with a $75 billion plan to promote loan modifications.

The report helps explain why many loans are falling back into default after being modified. Many borrowers and consumer groups contend that the modifications offered by the lending industry aren't very generous, despite more than a year of public prodding from regulators.

For instance, nearly one in four loan modifications in the fourth quarter actually resulted in increased monthly payments. That situation can happen when lenders add fees or past-due interest to a loan and spread those payments out over the 30- or 40-year period.

Perhaps unsurprisingly, the report found that loans were far less likely to fall back into default if a borrower's monthly payment is reduced by a healthy amount.

Nine months after modification, about 26 percent of loans in which payments had dropped by 10 percent or more had fallen back into default. That compares with about half of loans in which the payment was unchanged or increased.

"This new data shows that, in the current stressful environment, modification strategies that result in unchanged or increased mortgage payments run the risk of unacceptably high re-default rates," Comptroller of the Currency John Dugan said in a statement.

But regulators said they saw a positive trend in the data, collected from mortgage companies including Bank of America Corp., JPMorgan Chase & Co. and Citigroup Inc.

Bank of America is looking for a CEO to replace Ken Lewis as the bank has struggled in many ways over the previous months, needed a bailout, and has now lost its CEO, which many believe is a plus, but the biggest problem with Bank of America seems to be the trouble many are having with their home loan mortgage modification program. So, are the current difficulties with the modification program the result of these changes in the top administration or is it something more?

From reports on Bank of America’s home loan mortgage modification program up to November, Bank of America has only made 98 permanent home loan mortgage modifications and as far as current modification trials, combined with permanent modifications, Bank of America has only helped about 15% of those who qualified for a mortgage modification.

Is this a case of trouble within the bank or trouble with the home loan mortgage modification program? CEO Ken Lewis is on his way out and seemingly has done little in the past to help those in need of loan modifications since, again, they have such low numbers of home loan modifications when they have the most homeowners eligible out of any other major lender listed in a report on financialstability.gov.

Are Bank of America employees, or even Ken Lewis, simply thrown by the massive amounts of homeowners who need a home loan modification or does Bank of America simply care little about the modification program?

The modification process is difficult and not all employees who work for Bank of America and are assigned to the loan modification program can be blamed for the complexity and confusion many homeowners are citing since, again, there is great demand for modifications.

However, accounts in the news, media, and even comments here at rwbpress.com indicate that countless people are struggling with Bank of America in the home loan modification program and with the data showing that out of a little over one million homeowners who may qualify for modifications, Bank of America has only 98 permanent modifications in the works and 156,864 trial modifications ongoing presently.

Hopefully, news will be given soon as to why these numbers are so low and why so many are struggling in getting a home loan modification from Bank of America.

WASHINGTON — Just over 31,000 homeowners have received permanent loan modifications since March under the Obama administration's mortgage relief plan, spotlighting some of the program's failures.

Among big lenders, Bank of America Corp. had the worst results. The nation's largest lender had only completed 98 modifications for the 160,000 borrowers who had signed up by the end of November. GMAC Mortgage had the most of any lender, just 7,100.

The weak results mean the Obama administration is not going to hit its long-term target of helping 3 to 4 million borrowers with modified loans, said Ted Gayer, an economist at the Brookings Institution.

The more borrowers the program can't reach, the more foreclosed homes will spill onto the market, pulling down home prices. Almost 14 percent of homeowners with a mortgage are either behind or in foreclosure.

"Nobody really knows how big that wave will be," Gayer said.

The Treasury Department, which released the figures Thursday, said it will step up pressure on the industry to improve. The administration's focus is to "get as many of those eligible homeowners as possible into permanent modifications," said Phyllis Caldwell, chief of Treasury's homeownership preservation office.

When the poor progress was clear last summer, the Treasury Department set a goal of enrolling up 500,000 borrowers by Nov. 1. With the clock ticking, many lenders started giving homeowners verbal approval for a temporary modification.

"They were going to do anything to hit that number," said Marietta Rodriguez, national director of homeownership programs at NeighborWorks America.

Under program, eligible borrowers who are behind or at risk of default can have their mortgage interest rate reduced to as low as 2 percent for five years. They are given temporary modifications, which are supposed to become permanent after borrowers make three payments on time and complete the required paperwork, including proof of income and a financial hardship letter.

Lenders blame the low success rate — only about 4 percent of the nearly 760,000 who have signed up — on borrowers who don't return the necessary paperwork to complete the process.

But Michael Heller of Salinas, Calif., says he and his wife have submitted all of the required documents and made six months of $1,800 payments to Chase, but have yet to receive an answer.

"Every time we send them documents, they send us a form letter that says your modification is risk, you screwed up you didn't send us the necessary documents," said Heller whose landscaping business has taken a severe hit due to the recession. He figures the house he bought for $640,000 in 2006 is now worth $250,000.

"You never talk to he same person twice," he said. "It makes you a little bit kooky. This has been extremely stressful."

Chase did not immediately comment on their case.

Mike Brauneis, director of regulatory risk consulting at consulting firm Protiviti Inc. predicts that only 20 percent of borrowers who were verbally approved for modifications will ultimately sign up.

"Either people qualify verbally and never send their paperwork in, or they send it in and the numbers are different," he said.

And some borrowers, who lied about their incomes when they originally took out their loans, still aren't able to show proof. During the housing boom, the lending industry didn't require borrowers to prove their income, and those loans are highly concentrated in the states hardest-hit by the housing bust.

More than half of loans made in California and Nevada from 2004 to 2007, for example, required little or no documentation, according to research firm First American CoreLogic. Nationally about 4.3 million of those loans were made during the boom years.

"You definitely have a group that shouldn't be in the loan in the first place" said Terry Moore, managing director of consulting firm Accenture's North America banking practice.

A watchdog report this week said the government effort "appears capable of preventing only a fraction of foreclosures" and said that only $2.3 million out of a potential $75 billion government commitment had been spent.

Steve Carpinelli, 39, of Alexandria, Va., thought he'd be a natural candidate for the Obama plan, after seeing his income drop 35 percent from about $65,000 two years ago. He's struggling, but has still made his $2,400 mortgage payment so far.

Though he initially approved for a temporary modification, made four trial payments and sent back the necessary, he was denied last month.

"It is the most grueling processes I have ever been through financially," Carpinelli said.

A Citi spokesman declined to comment on his case but said, "if the borrower does not qualify, we look for other potential loss mitigation solutions."

The NYT reports on how cumbersome and difficult it is for a homeowners -- even with someone working on their behalf -- to talk to their bank about getting a loan modification.
Pulling teeth is not an apt comparison. A better one might be: dealing with a health insurance company.
In some cases, it's just a matter of dealing with bank bureaucracy and call center workers that have almost zero training, motivation or customer service skills.
Other times it's stuff like this:
In another office down the hall, Ramin Lavi, 27, has picked up the file of Alice Descovich, who is seeking to shave down the $708,000 she owes on a mortgage serviced by WaMu for her home in Alameda, Calif. As the interest rates reset in coming months, it will become even harder for her to make the payments, which are now $4,400 a month.
A note in the system shows that the bank confirmed receiving documents on April 29 — pay stubs, tax returns, a letter disclosing her hardship, bank statements. Since then, the company has been waiting for WaMu to review the file.
But when Mr. Lavi calls, a representative coolly discloses that the application has been rejected because one document, a proof-of-insurance form, is missing. He must start over.
Start over? Seriously?
Even the success stories are depressing failures.
Another agent, Lee Wasser, props his feet on an adjacent desk chair as he waits on hold for more than 20 minutes to speak with GMAC Mortgage.
His clients, Dean and Nancy Piercy, owe $380,000 on the loan for their home in Shasta Lake, Calif. A logger, Mr. Piercy has lost work hours, making it hard for them keep up with their $2,048 monthly payment — soon set to rise.
Mr. Wasser has already negotiated a solution: GMAC will accept only $270,000 in repayment, allowing the couple to get a fixed rate mortgage from another bank.
But that suddenly is in disarray. The Piercys have been making their payments, but GMAC has been putting their checks aside, holding the money as “loss mitigation fees,” until their application is completed. It has notified credit bureaus that their loan is more than 90 days delinquent, which has lowered their credit score, disqualifying them for the next mortgage.
Read the whole thing >
The whole article is like that, and who knows, perhaps the writer only cherry-picked bad examples. But the paucity of successful loan mods is well known, and given the sheer numbers who are probably trying to fix their housing situation, the bad experiences are probably representative.
The banks keep saying they're training new workers and will have better systems in place, but our guess is that it won't help. If the banks actually wanted to modify these loans, they would. Inertia, it seems, is more profitable. And so, like the health insurance companies, they've decided that efficiency and customer service are the enemies and that outwit and outlast is the proper strategy.
Who knows, maybe it's time for a new, state-sponsored bank. A "public-plan" for banks, if you will. If people like their current banking system (raise your hands, all two of you) they can keep that. If not, they can go with the public one. Too bad Bank of America's already taken.

Those who aren't in imminent danger may have to wait in line

• By Allison Bruce Posted June 19, 2009

Photo by Rob VarelaRob Varela / Star staff

To battle foreclosures, the Obama administration launched programs with hopeful names such as Making Home Affordable, but as many homeowners seeking assistance are learning, such programs have added more confusion than help.
Many people look at the criteria for refinancing, loan modifications and assistance, then approach their lenders because it appears they qualify for help. But many find that, for one reason or another, they aren’t getting assistance.
“It is frustrating,” said Camarillo resident Keith Pillow, who lost his job earlier this year and has been trying to get a loan modification through Bank of America. He originally had his loan with Countrywide Financial Corp.
“When they have so many people absolutely desperate for assistance, I would think that they would be more accommodating,” he said. “That is not the case.”
Pillow spent months trying to get a modification. He just received conditional approval last week and is now going through a review process.
Though his story may have a happy ending, it’s been a difficult process.
Pillow always has been very careful with his finances, paying bills on time or early and securing a 30-year fixed mortgage at a good rate.
“I never thought that I would have to go through this,” he said.
But all that caution put him at a disadvantage. He wasn’t a top priority when it came to loan modification.
Bank of America spokesman Rick Simon said the bank did 157,000 loan modifications in the first four months of this year, even before Making Home Affordable came into play.
He said there is confusion over when the program started, since it was announced before guidelines were in place.
“Everyone seems to think this program goes back to February,” he said.
The guidelines weren’t announced until March and contracts signed in April. Bank of America started sending out letters April 20 to borrowers identified as loan modification candidates under the plan.
In the eight weeks since it started, Simon said the bank has sent out letters to 170,000 borrowers and offered about 35,000 trial modifications as required by the U.S. Treasury Department’s guidelines.
Not helping the unemployed
If someone doesn’t fit into Making Home Affordable or Bank of America’s National Homeownership Retention Program, which helps borrowers with subprime loans and certain types of adjustable-rate mortgages, Simon said the bank would try to find a solution through other programs.
But two things have to take place, he said. The homeowner has to want to stay in the home and he or she has to be able to make the new payments. “There still has to be income,” he said. “This is not helping people who are unemployed .... There isn’t a program out there that is going to help those people tremendously impacted by the economic situation we’re in today.”
There also are other requirements, such as getting investors who hold the loans to sign off on the modifications. It’s much easier to make modifications to a loan held by the bank or by Fannie Mae or Freddie Mac. Those owned by investors often require case-by-case consideration.
Some investors are even suing Bank of America, charging that it should be responsible for the cost of modifications.
Bank of America chose to start with borrowers in imminent danger of foreclosure and is still developing models for those who are current on their loans but can demonstrate a hardship, Simon said.
He said circumstances changed in Pillow’s case and the bank is trying to find a solution for him.
Pillow said he needs a modification after watching his income plummet. He’s drawing unemployment and, though he expects his new business will start to generate income this year, it won’t be anywhere close to his six-figure salary from Thomson, parent company of Technicolor.
He doesn’t want to start dipping into his retirement accounts to pay his mortgage.
What he would like is to change his 5.25 percent 30-year mortgage to a 4.5 percent 40-year mortgage. Pillow argues that would let him make the payments and keep that money flowing to the bank.
His home, purchased at $475,000, is now worth about $325,000. He owes more than $400,000.
“Under the stimulus plan, I qualify” for modification, he said.
He adds, though, that it’s not clear to borrowers what the options are and who can do what under the federal plan.
Documentation needed
There are certain requirements people have to be aware of as they enter into the process, said Elizabeth Alvarez, program director of Consumer Mortgage Advocate. For example, modification applicants have to be able to provide full documentation; people aren’t likely to qualify if they can’t document their income.
Alvarez runs a Web site, HomeownerHope.org, that helps people see if they are good candidates for modification under government programs.
Even for people who qualify, securing a loan modification is a tough process, she said.
Alvarez has worked with people who qualify for loan modifications, but they felt it would be easier to walk away from homes than go through the constant, exhausting process of seeking a modification.
Walking away isn’t an answer, she said.
“It doesn’t help our communities; it doesn’t help the banks; it doesn’t help our economy,” she said. Foreclosures are a terrible waste of time, resources and money, she added.
She mentioned one woman who was able to afford her condo on her fixed retirement income. Then the market bottomed and suddenly she couldn’t afford where she lives.
“It’s heartbreaking,” Alvarez said.
Those seeking loan modifications run across a wide range of financial fitness.
Valencia Attorney Louis J. Esbin assists clients trying to do loan modifications as part of their bankruptcy filings. He doesn’t charge a fee to help with loan modifications but makes it a part of his service.
Esbin is former head of the Central District Consumer Bankruptcy Attorneys Association.
Often, because the borrowers involved in bankruptcy have so much debt and only a certain amount of income, they are denied loan modifications or the ones they get are so inconsequential people aren’t accepting them, he said.
“Some loan modifications come back where people maybe pay more every month than they were paying before,” he said.
‘Tremendous change’ not seen
Esbin said many people continue to turn to the loan modification industry that has quickly cropped up. He warns that many companies want a large sum of money and their guaranteed results can be suspect.
The state Department of Real Estate cautions that loan modification companies are not allowed to guarantee modification success. The department’s Web site has a list of companies that have received “desist and refrain” orders or accusations.
Alvarez said some homeowners have found writing to their elected officials helps their cases to get “unstuck,” but even that has limited success.
“We’re supposed to be in a time when people are ironing these things out,” she said.

by Alexandra Andrews, ProPublica - October 1, 2009

Qualified homeowners are being routinely denied loan modifications through the Obama administration’s Making Home Affordable plan [1], but they have little recourse to correct the mistaken denials, housing advocates say. In the absence of an effective appeals process, some borrowers have improvised their own solutions: They turn to journalists or congressmen [2] – or take Treasury Secretary Timothy Geithner to court.
According to the government’s latest public figures, less than 12 percent [3], or roughly 360,000, of the borrowers projected to pass the program’s initial eligibility test [4] had received loan modifications by the end of August, about five months in. The process of reviewing those borrowers for final qualification has been “pretty haphazard,” according to Geoff Walsh of the National Consumer Law Center. 
“People are wrongly denied all the time. Every day,” said Irwin Trauss, supervising attorney at Philadelphia Legal Assistance. “The lenders are generally applying the criteria incorrectly.”
Under the program, the government pays mortgage servicers to reduce borrowers’ payments. The servicers have signed contracts agreeing to abide by the government’s eligibility parameters, but the servicers determine whether a borrower meets them.
As we reported last month, when mistakes are made, it’s difficult – often impossible – for borrowers or housing counselors to catch them because servicers typically keep their calculations in the dark [5].
In July, four homeowners in Minnesota sued the Treasury Department for not creating an appeals process for denied homeowners. One plaintiff received a “boilerplate” denial letter from his loan servicer that listed “theoretical examples of the reasons for a denial,” none of which applied to his case, according to the complaint.
The Treasury Department responded that borrowers have had access to a “Hope Hotline Escalation Team” since July 10, which “provides an avenue for borrowers to complain about improper denials and receive an explanation for their denial.” But Trauss said that no one in his office, which works with 30 housing agencies, had ever heard of that resource. “It does not seem to be very well advertised,” he said.
Diane Thompson of the National Consumer Law Center said the hotline is “useless”: poorly promoted and ineffective. “All the Hope hotline can do is ask (servicers) nicely to please think again,” she said, adding that she knows of no one who has gotten results from it.
A spokeswoman for the Treasury Department said that, as of today, mortgage servicers will be required to report the basis for denial to both the government and the borrower. Freddie Mac has also begun auditing a sample of borrowers who were rejected, although it’s not clear when those results will be made public, she said.
Thompson said that “at a bare minimum,” there should be a number at Treasury or Freddie Mac where borrowers have access to an independent review of their denial, with the servicer bound to the outcome. The Treasury spokeswoman said that servicers have been asked to develop their own processes for dealing with borrower complaints.
In lieu of a formal appeals process, some frustrated borrowers have had success going to the media. Servicers often reverse their decisions when contacted by a journalist, said Guy Cecala, publisher of Inside Mortgage Finance.

Last month, NPR broadcast a report [6] from Bank of America’s home retention department. During the visit, a reporter looking over the shoulder of a company employee thought she had incorrectly rejected a customer from the Making Home Affordable program. The employee stuck to her position, but when NPR inquired with her supervisors, they realized that the reporter was correct and offered the homeowner a modification. The company said it would have caught the mistake eventually. Another homeowner who had been repeatedly denied a modification on the phone was also offered one after NPR questioned the company about the basis for that denial.

The Bearce family

Last month, we wrote about Ian and Megan Bearce of Glendale, Calif., who had been asking Bank of America for a loan modification for months [7]. They finally got one on Sept. 8, but Megan says they began making progress only after ProPublica got involved and Bank of America plucked them out of the obscurity of the home retention department.
“From the sounds of it, several people have been told of our case, and we’re a priority,” she said on Sept. 1. She said it was “quite a difference” from the long hold times, missing faxes, delayed deadlines and unreturned phone calls they had endured before.
The Bearces were assigned a case manager the day after we asked Rick Simon, a company spokesman, about their case. A few days after the story was published, they were transferred to the media department, where Megan said their contact was “very helpful” and took the time to fully answer all their questions – a first for them.“It’s so sad that it took four months to get this done with so much help,” she said, “and that for others who don’t have these resources, it’s probably impossible.”

March 31, 2008

By Angie Moreschi:

The foreclosure work-out myth is being promoted by mortgage lenders right now, with catchy names like Countrywide’s “HOPE” program and the EMC “Mod Squad,” but it’s time to expose the hoax. Lenders are falling over themselves to make federal lawmakers believe they’re working with borrowers to avoid default. They cry, “We lose money, too, when we foreclose on a home!” It’s all about chilling the call for tougher regulations. “We’ll do the right thing, promise.”

Unfortunately, it’s smoke and mirrors all over again, just like the predatory loans that got us into this problem in the first place. The reality we’re seeing day after day is that lenders, despite their promises, are once again not living up to their end of the deal. They’re not really working with borrowers. Instead, they put homeowners into unworkable work-out plans, and get a few more thousand dollars out of them, before dropping the ax anyway. Families are being driven out of their homes unnecessarily. It’s just wrong, and it hurts the entire community.

What’s in it for them? Why won’t they work with borrowers? It all comes down to money:

• • Lenders can make extra money on loans in default, because they charge late fees, penalties, attorneys fees and bogus fees, like drive bys’ which essentially is a fee the company charges to drive by the house to make sure the lights are on and the borrower hasn’t vacated the property.These drive-bys’ have been as much as $45 a pop.
• • Consider the case of Countrywide. The company made $285 million in late fees in 2006. That was 7.5% of Countrywide’s servicing revenue in 2006. Up 20-percent from 2005.
• • A study by University of Iowa Professor Katherine Porter showed that half of the loans she examined in foreclosure had questionable fees added. Most fees were under $200 each, but collectively they could add up to millions of dollars for loan servicers. Take note that now that lenders are originating fewer mortgages, servicing revenues make up a greater percentage of earnings.
• • The lenders know the borrower will do whatever they can to come up with the money to save their home, whether it’s borrowing from a relative or dipping into their 401K. Lenders like to keep borrowers in desperate positions.
• • A borrower’s loan is simply a pawn for investors to make money. The fact that it’s the biggest investment in your life doesn’t matter. What’s important to the lender is that it’s part of someone’s investment portfolio. The lenders have strict agreements with investors that often block them from modifying loans, without their approval. Why? Once again, it’s because loans in default can bring in more money.

So, let’s stop all the charades. The lenders can come up with all the catchy names they want for special programs to help homeowners facing default. None of it matters to the borrowers who end up being told, “Ah, sorry can’t help you. Our lawmakers need to wake up and understand the lenders, once again, are not doing what they promised to do.

Fool me once shame on you. Fool me twice shame on me.