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Loan Modification Efforts Helping Few Borrowers

December 13, 2009

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RISMEDIA, July 21, 2009-(MCT)-Despite efforts by the federal government and banks to stop the home foreclosure disaster, frustrated borrowers are still battling red tape and delays in their attempts to negotiate lower payments, even as hundreds of thousands of them lose their homes every month. Banks say they’re swamped with inquiries and are just now completing the first mortgage “loan modifications” under the Obama administration’s Making Home Affordable plan, the program begun in April 2009 requiring borrowers to make three months of renegotiated payments before securing new loan terms.

Though the reasons are many, the problem is simple: Banks aren’t renegotiating enough loans to stem the rising tide of foreclosures, either through the federal program or on their own. “If the banks wanted it to work, it would work,” said Fred W. Schwinn of the Consumer Law Center in San Jose.

Many banks started their own programs for modifying mortgages-lowering payments by changing the interest rate or the length of the loan, or in rare cases, forbearing some principal-before the administration’s plan was unveiled. Two San Jose homeowners who sought help through their banks’ programs told tales of seemingly endless red tape.

Angelo Gallo, of San Jose, sought help from his bank lowering his monthly payments in January, before the Obama plan was announced. He said he and his wife, Mary, worked with their lender for five months, fulfilling numerous requests for more documents, but recently they were told they had to start over. “I was so frustrated,” Gallo said. “Every time you call it’s a different person, and it seems like the files are all over the place.”

Fairilla Turner, a single mother from San Jose who was laid off from her semiconductor technician’s job in January and now works part time, said her bank assured her she qualified for a renegotiated loan last November. She said the bank repeatedly asked her for additional documents, which she said she supplied. In April, the bank told her told to submit a new application.

Turner paid a Southern California consultant $2,000 for assistance. But it didn’t work: The bank is foreclosing and has given her four months to move out.

The Treasury Department, which runs the Obama administration’s Making Home Affordable program, declined to comment on criticism of the banks, however, it’s monthly progress report on the modification program shows that mortgage servicers had started 759,058 trial periods with consumers nationally by the end of Novembers 2009. More than 697,000 of them were considered active trial modifications and 31,382 were permenent loan adjustments.

This was the first month the Treasury Department required mortgage servicers to release the number of permanent modifications and while the data shows the number of trial modifications is increasing, permanent conversions to more affordable loan terms are running far behind.

Bank of America, which has more than 1 million mortgage loans that are at least 60 days past due and eligible for the program said it has 156,864 homeowners in trial modifications but only 98 borrowers received permanent modifications. JP Morgan Chase’s 448,815 delinguent, eligible mortgages, 136,686 customers are in active trial modifications and 4,302 have received permanent ones. Wells Fargo Bank had 30% of it’s customers in modifications, including 96,137 customers in trial period and just 3,537 in permanent modifications. At CitiMortgage, 100,124 of it’s 233,924 deliquent borrowers were in trial modifications and just 271 received permanent modifications.

Quite simply this program is not even making a dent and brings false hope to homeowners. Bankruptcy lawyers are particularly critical of the banks. The banks’ current efforts are “largely a farce,” according to Cathy Moran, a bankruptcy lawyer in Mountain View. She said most of her clients have been unable to modify their home loans. “I don’t think the people in the loan modification departments at banks are empowered to make deals,” Moran said.

“There is an amazing lack of staffing to support the flood of modification requests the banks are getting,” said San Jose bankruptcy lawyer Norma Hammes, past president of the National Association of Consumer Bankruptcy Attorneys. “Lenders lose stuff all the time, and they ask for stuff they don’t need. We have to jump over hurdles and through hoops all while the banks continue to collect loan servicing fees which is undoubtly their true goal.”

“I’m seeing several people each week with the same hard-luck story of how mortgage lenders have led them on for months, lose the paperwork and then find one excuse or another to turn them down,” San Jose bankruptcy lawyer James “Ike” Shulman. Banks say they’re doing the best they can, given a flood of requests for loan modifications.

Help for homeowners
The Obama administration is working with banks to help homeowners refinance into new loans, modify the terms of their existing loans, and if all else fails encouraging homeowners to pursue short sales in an effort to avoid foreclosure. Here’s how the programs work:

-Refinancing program: Helps homeowners with existing Fannie Mae or Freddie Mac loans who are current on their mortgage payments but unable to refinance to a lower interest rate because the value of their home has declined.

-Loan modification program: Helps homeowners who have fallen behind on their payments because of a loss of income or other change in circumstance. Banks may agree through this program to change the interest rate, length of the loan, or even forebear some of the principal.

-Short Sale: Short sales help homeowners who are unable to refinance their home and are unable to arrange a loan modification. Banks may agree to allow the home to be sold short, that is for less than the existing mortgage amount. The banks will cover all of the costs associated with the sale including the sales commissions and other closing costs.

If you’re facing foreclosure you’re facing some very important decisions. We want you know you’re not alone and we are here to help with any questions you may have to assist you in making the best decisions for your situation. There is no charge for this service and we are happy to help! We offer confidential and professional real estate advice.

The Opland Group Specializes in Real Estate Sales, Luxury Home Sales, Short Sales in;  Bexley  Columbus  Delaware  Downtown  Dublin  Gahanna  Grandview Heights  Granville  Grove City  Groveport  Hilliard  Lewis Center  New Albany  Pickerington  Polaris  Powell   Upper Arlington  Westerville  Worthington


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