rssBanks Contradict Themselves on Why Loan Modifications Aren’t Working
Tuesday, September 01, 2009 at 9:12 am
- 36 Comments
CNN examines the stalled efforts to rework troubled mortgages, noting that only 6 percent of 4 million eligible homeowners have been helped so far under the Obama administration’s Making Home Affordable program. The piece notes that banks say they are trying to do loan modifications, but need more time to get up to speed on the program. Housing advocates say banks need to be forced to do loan modifications because a voluntary program just won’t work.
Critics say that the program works against the banks’ best interests, as the homeowners who most need the program are the riskiest bets.
“If the borrower is really in trouble, [the lenders] probably don’t want to do the modification, because they think there’s a good chance the borrower will redefault, and they will do a lot of work and they won’t collect money,” said Paul Willen, an economist with the Boston Federal Reserve who has studied bank foreclosures and modifications.
“The problem with this is in some deep sense, you can’t penalize the banks for acting in self-interest. It’s a for-profit business.”
But via Calculated Risk, Diana Olick at CNBC gives Bank of America’s view — that it’s holding off on foreclosures in order to modify loans.
Foreclosure sales have been abnormally low since we learned of the pending implementation of the administration’s Making Home Affordable program. From that point, we delayed the initiation of foreclosure proceedings and sales for customers that may eligible for a loan modification under MHA. As a result of this policy, our foreclosure sales in recent months have been as little as half the normal pace we experienced before.
So … which is it? Banks are either refusing to modify loans because they’ll end up losing money on borrowers who will only re-default, or they’re holding off on foreclosing in order to help borrowers who might qualify for a modification. But they can’t be doing both at the same time.
So why are loan modifications really stalled? It looks like the only correct answer might be that we clearly don’t know. The CNN report, however, does include a tidbit that give a little more insight into the problem:
Multiple administration officials insist to CNN that there is adequate oversight of the program and that the Treasury Department has enlisted Freddie Mac to monitor the banks.
A Freddie Mac official, who would speak only on the condition of anonymity because it is acting “at the direction of Treasury,” told CNN that its investigators visit banks, but only after giving the banks’ management notice that they’re coming.
The agency reviews loan documents, but only those that lenders provide. There are no surprise visits, no tape recordings of bank calls to assure quality assurance, and no way to respond to individual homeowner complaints.
So let me amend my earlier statement. We don’t really know why loan modifications aren’t working — and we’re not really trying o figure out why, either.
36 Comments
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Comment posted September 1, 2009 @ 7:09 pm
I have been trying to get a loan modification from Chase since January 2009, one excuse after another compliants to several government agencies didn't get anything moving. Now they have had a computer conversion in June and July.
Why is the government doing nothing?
Comment posted September 1, 2009 @ 8:53 pm
Welcome to our world! I work for a company doing loan mods and the “red tape” to process these things is unreal. It can literally take a year in some cases to get an answer from the lender. Resubmitt paperwork several times, wait on hold for an hour to get an update, programs and requirements that change all the time….. Usually, the only loan mods that get done in a timely fashion are those properties that have trustee sale dates (In some cases they're done in less than 30 days) Otherwise, it seems that the banks are trying to keep the properties on their books at inflated values for as long as possible. Most likely in an attempt to make their financials appear healther than they really are. A term has been coined by the industry, it's called “extend and pretend”
I would welcome a journalist in for a day to experience this first hand. Again, it's unreal….
Comment posted September 2, 2009 @ 1:39 am
I believe that lenders are modifying loans but due to borrowers going to free government agencies to get help or attempting to modify themselves is what is causing the problem. The free government agencies consist of people trying to help but they do not have a mortgage background and can not tell the difference between the documentation needed for a borrower on W-2 verses 1099. It is ridiculous – I myself have called on several occasions to see the type of service these free government agencies provide and had to wait 3 weeks to get an appointment and then to be transferred from one person to another. In other words it is a joke. In order to get a loan funded it needs to be packaged properly and the underwriter should be clear as to the situation and all income needs to be documented and needs to make sense. A loan modification is a complex full doc loan. In order for an investor to agree to a modification the borrower needs to show 1) hardship – why they can not afford the current mortgage payment and 2) proof they can afford a modified payment and 3) it has to make sense for the investor to modify. The problem is that files are being submitted to lenders incomplete and they do not make any sense – they simply get lost in transit or denied for no reason and this effects everyone. Also, the numbers simply have to crunch in order for the modification work. It takes an experienced mortgage broker to package a file where the negotiator will not have any questions and can assess the situation and render a decision. Lenders are overwhelmed, understaffed and under paid. They are working very hard and we need to work their system. If we don't then we all will suffer. I own a Mortgage Broker Firm that specializes in the field of loss mitigation, full doc underwriting and mortgage lending. We have been very successful with loan modifications and even have an Affiliate program where Mortgage Brokers and Attorney's can submit their client's loan modifications and short sale negotiations to our firm to service. My website is http://www.myloanunderwriters.com and my phone number is (818) 565-6212 Ext. 222. We do not charge upfront fees and are in full compliance with the DRE.
Comment posted September 2, 2009 @ 4:14 am
Mr. President why are the banking,and loan company not making loans as you promised they would do for the american people we are all hurting and not getting any help. Time for them to answer to you for not helping us the little people that keep them in business, maybe we should boycott their business. Check http://www.obamamortgagerelief.org/
Comment posted September 2, 2009 @ 2:31 pm
I have a loan for $270K on a house with an estimated market value of $140K per Zillow or $80K based on recent sales of similar foreclosed properties. My ex is in a similar situation. Her bank just sent her, out of the blue, a notice they were dropping her principal to the market value a decrease of something over $100K. Something similar would work for me so I don't walk away from this house of mine and buy something much better for much less than my current mortgage. As of now, I have never been one day late on my 1st & HELOC, and always pay much more than the minimums on my HELOC. My loan is less than 20% of my gross per month (and less than 2 X annual salary). My income may take a significant drop next fiscal year. If it does, I am thinking why throw good money after bad when in retrospect, the banks' poor loan practices caused the inflated market value of the house I bought.
Comment posted September 2, 2009 @ 8:28 pm
quote:
[Most likely in an attempt to make their financials appear healther than they really are. A term has been coined by the industry, it's called "extend and pretend"
Exactly! The banks have been allowed to claim FASB deviations in their reporting, using “mark-to-market” accounting methodologies. Similar to “some” of the Arthur Anderson techniques employed on behalf of Enron.
The Emperor has no clothes, man! It has ever been the same! People are just finally getting a whiff of the charade!
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Comment posted September 3, 2009 @ 5:17 am
Check out http://www.obamamortgagerelief.org/ . There needs to be a program for the elderly but not quite to retirement age for mortgage modification when the have lost their job during this particular recession. I made a decent wage because I put my time into a company and now have no job. I am looking at $10 – to $12 hr jobs after working all my life. You can't make a mortgage payment on that kind of money. I will eventually lose my home.
Comment posted September 5, 2009 @ 5:13 am
This whole stimulus package is just part of the governments long term plan to take away the power of the people. Are we going to do something about it or be lazy and think someone else is going to do it for us? It is time for a revolution. We need to overthrow the government and take our power back. Before there is nothing we can do about it.. you should check http://www.obamamortgagerelief.org/
Comment posted September 5, 2009 @ 7:01 pm
Bank of America holds on loan modifications… first they try to drain money from you in a mortgage refinance telling you that it is government sponsored. THEN, they don't do modifications unless the reduction of interest is only marginal. Under the making home affordable program, there are instances when they can bring it down to 2% for at least 5 years, YET Bank of America would deny any modification that might need reduction to less than 4%.
Comment posted September 7, 2009 @ 7:36 am
Seriously.. these lenders don't care if their helping homeowners or not; merely that they get the FTC and HUD off of their backs. I've gotten an inordinate number of homeowners into trial loan mods under Making Home Affordable in the last month that wouldn't normally qualify simply because of the pressure that's being put on the lenders so I can't complain … :D
Pingback posted September 15, 2009 @ 4:26 pm
[...] Mary Kane wrote an interesting post today onThe Washington Independent » Banks Contradict Themselves on Why <b>…</b>Here’s a quick excerpt [...]
Comment posted September 17, 2009 @ 2:21 am
we were offered a loan modification by wells fargo sept.8 at a wells fargo workshop in phoenix sept.8/09. we were told that it would take 5 business days to finalize.it has been 6 business days to date with no action other than they told us tonight to call back in 10 days and they might have an answer.it's the same run around we have been getting since march 30/09.
Comment posted September 26, 2009 @ 7:32 am
I am a negotiator, been in the mortgage industry 29 years. Owned my own mortgage company 6 years. I've read everyone's e mails about getting an approved loan modification. Like Michelle said below the non profit orgainizations do not negotiate to the full extent and they do not have the knowledge on how to submit a difficult Loan Modification package. My best advise to homeowners that want to do modifications themselves is to call your bank, check their website if they have their own application that needs to be completed. Complete the financials and do not include expenses like, clothes, entertainment, monthly nail appointments, money left over, shoes for children….the whole idea is to show that you cannot afford these “extra” expenses into your budget. Remember, you are in a hardship and you want to show that you cannot afford to make your monthly payments. If your monthly mortgage payments include your taxes and insurance…then say its included. If you pay your monthly taxes and insurance, make sure these monthly payments are included even though you are behind. Remember to include your unsecured debts..the lender will pull credit and add these payments in unless you cannot afford to pay your credit cards. Also, be aware that if you are paying your unsecurecd debts and not your mortgage that might show as a “red flag” since that your home should be the main reason for keeping. I had a woman that had three cars showing on her credit report. She did not disclose this to her lender when submitted her financials. However; we found out her son pays one and the daughter pays for the other. We had gotten a contribution letter from the both of them and had these notarized. This showed they could make the mortgage payments and she wasn't over extened 1650.00 per month. I also work up the expenses vs the income and if there is a large descrepancy either I ask the homeowner if someone else is living in the property helping with the payments? They had rented out a room and we got a rental agreement. (some lenders will ask for the utility bill from the tenant in your home or bill they receive at the house like cell phone bill etc) You can also use contribution if famly lives with you and helping with expenses..you can use their income and have to get a contribution letter from the family member as well. In California, its a communtiy property state and some had gotten the house before they were married and now the spouse helps with the payment…we do not use a contribution letter since they are married. I recommend that you complete the financials and have at least 300.00 surplus left over per month. The lenders are looking at hardship letters as well…make sure that your hardship makes sense. Example: you had lost your job and gotten a new one..during the three months you were laid off which is when you cannot make the payments. It could be your income has been declining due to less hours working or your employer is only giving you part time work. It could also be on unemployment benefits…you can use this income to qualify. You can use temporary disability- I have a borrower that has back problems and needs a hip replacement and his job will not let him back to work unless he can lift 100% without problems. His doctor renews his temporary disabilty every 45 days until the doctor diagnoses him to be fully disabeled. If your house payments are current and you are struggeling to make ends meet…you can say that as well…income dropped..less income…using credit cards and savings to make ends meet and running out of money. Remember, also a home can be current in payments however; you cannot refinance due to mortgage is more that what the house is worth and your payments are going to adjust in a year or two or you are in an Option Arm loan , the four payments options and you pay only the deferred interest payment…your balance is going up more than the original loan was and your loan will recast after the fifth year…or will recast at 125% of the original loan amount whichever comes first. These types of loans are part of the government program. There is a website : http://www.makinghomeaffordable.com which will answer some of your questions as well as finding out if your loan is FNMA or Freddie Mac loan or if its an investor loan then it will be under the HAMP program which is also using the same guidelines. Anymore questions, please feel free to e mail me at : lkuualoha@yahoo.com and I will try to help you with your process.
Comment posted September 26, 2009 @ 7:38 am
If anyone has a trustee sale and doesn' have the money to save their home…I will try to help you get a trial period modification or a forbearance plan to stop the trustee sale. I will try to give you advise to do it yourself. It depends on the bank. You can e mail me with your questions: lkuualoha@yahoo.com
Comment posted September 26, 2009 @ 7:41 am
dear victor salmons, do you receive unemployment wages? If so, you can use that as income and also use anyone that lives in the household you can rent out a room..this will help you get approved.
Comment posted September 26, 2009 @ 7:43 am
check out http://www.makinghomeaffordable.com for their guidelines for approval. This will answer a lot of your questions.
Comment posted October 13, 2009 @ 6:59 am
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Comment posted May 10, 2010 @ 11:05 pm
WHERE IS OUR LOAN MODIFICATION BANK OF AMERICA!?
If it walks like a piggy, talks like a piggy, by golly it’s a PIGGY!
BofA and it’s CEO Brian Moynihan reminds me of that song by John Lennon and George Harrison titled “Piggies” I invite you to listen to this song on youtube and see if it appropriately fits.
http://www.youtube.com/watch?v=NTmeHM-Hojg&feat…
Have you seen the little piggies
Crawling in the dirt
And for all the little piggies
Life is getting worse
Always having dirt to play around in.
Have you seen the bigger piggies
In their starched white shirts
You will find the bigger piggies
Stirring up the dirt
Always have clean shirts to play around in.
In their ties with all their backing
They don't care what goes on around
In their eyes there's something lacking
What they need's a damn good whacking.
Everywhere there's lots of piggies
Living piggy lives
You can see them out for dinner
With their piggy wives
Clutching forks and knives to eat their bacon.
Patricia Barbosa – 818-713-2886
Assistant Vice President Office of President at Bank of America:
Call Patricia Barbosa if you want to complain about your loan modification process. She is a CEO in charge of home modifications.
When I filed my lawsuit against Bank of America, myself and United Law Group thought of the many others out there in the same situation. It was then that we decided to educate the public on what these piggy banks are doing, as well as unite us all together as one voice. Please help me turn this David vs. Goliath modification process, into a Goliath vs. Goliath.
Please stand with me and United Law Group and send an email to Bank of America that states that we will no longer tolerate their potentially illegal, fraudulent, irregular and abusive business methods.
One blogger named Terri sent me an email stating: “You won't believe it but while I was at work today I had a voicemail from an advocate from BofA. What do you think about that? No calls all this time, I respond to your email and I get a cal!. How do you like that one?
So please send your email directly to Bank of America and include the following:
1. Your name
2. Your complaint concerning your experience with Bank of America.
3. Please end your email “I support John Wright vs. BofA Lawsuit!”
4. Please send a copy of your email to johns-wright@hotmail.com
5. Please send your email to BofA CEO email below:
CEO Brian Moynihan:
brian.t.moynihan@bankofamerica.com
WELL I HAVE HAD ENOUGH AND I AM FIGHTING BACK!
John Wright Vs. Bank of America
Please join my fight or show your support through your comments at http://www.unitedlawgroup.com
Divided we might have fell America. UNITED WE MUST STAND!
Sincerely,
johns-wright@hotmail.com
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