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 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. The banks, however, continue to urge patience,
particularly with the federal plan: "A lot of people had expectations
from this program who didn't understand it would take time, but the
intention is there and we'll move ahead," said Rick Simon of Bank of
America Home Loans. 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 tape. Angelo Gallo, 46, 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." Saturday, the bank informed him it would start
foreclosure proceedings. But on Tuesday, a bank representative told him
he may qualify for the federal government's Making Home Affordable plan. "That's the first I heard about it," Gallo said, though the program was announced in early March. Fairilla
Turner, 50, 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, and
says it will release data this month on how the program is faring. More
than 50,000 loan modifications are in process and more than 270,000
borrowers have been offered loan modifications by 25 loan servicers, a
department spokeswoman said. But foreclosures continue at a
high rate. "There are something like 2.5 million U.S. homes in
foreclosure now, and 250,000 new foreclosures started every month,"
according to Valparaiso University law professor Alan M. White, who studies the issue. "They are not even making a dent," he said of the administration's program. 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." "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 said. Banks say they're doing the best they can, given a flood of requests for loan modifications. Simon
said Bank of America's 7,400 "home-retention specialists" are taking
about 80,000 calls a day. The bank has made more than 48,000 offers
through the federal program and now has 18,000 people making payments
in their trial modification period. Chase is moving
through a backlog of 155,000 loans "as fast as we can, having hired
nearly 3,000 people to help in the process, including 950 loan
counselors," spokesman Thomas Kelly said. The bank, which took over
failed subprime lender Washington Mutual,
has approved 87,100 trial loan modifications under the federal plan,
Kelly said, and an additional 50,900 under the bank's own program. A spokesperson for Wells Fargo declined to comment. On
a smaller scale, Fremont Bank says it has completed 50 modifications on
its own and has an additional 31 in its three-month trial period.
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