Homeowners Believe Banks Not Serious about Refinance or Loan Modification Program

by admin ~ March 1st, 2010.

A slew of struggling homeowners are coming forward with complaints about the way banks are operating under a federal loan modification program announced last year by the Obama administration. Thousands of American homeowners need help mortgage refinancing or qualifying for a loan modification agreement that would lower the interest rate, like a refinance loan.

“You Qualify.”  Those two words, from the mouth of a bank representative last October, triggered a wave of relief for Tracy Davis and her husband James. The couple had been in and out of work for three years and were struggling to pay their home loan on time, so when the Bank of America worker told them they qualified under a federal program to receive a loan modification, they finally saw a path to keeping their house.  “We walked out thinking, great,” Tracy Davis said.  But weeks went by, and nobody contacted them, and they weren’t able to reach anyone — other than representatives at a call center in India. “To this day, we’ve not heard from someone,” she said. “It’s February. This goes back to October 30.”

The Davises, who live in Cincinnati, are among a slew of struggling homeowners coming forward with complaints about the way banks are operating under a federal loan modification program announced last year by the Obama administration. The program, called the Home Affordable Modification Program, aims to keep 3 to 4 million people in their homes. Federal statistics show banks are making plenty of offers, but relatively few of those loan changes are being made permanent of the more than 1 million homeowners who have started the required three-month trial period, only 116,000 have had their new terms made permanent. 

The complaints have a common tune. Homeowners say the banks are giving them the runaround either by pledging to modify loans and then not following through, as with the Davis family, or by signing them up for the trial period and then leaving them in limbo. ”This is an epidemic problem,” said Stuart Rossman, director of litigation with the National Consumer Law Center. 

Under the terms of the Treasury Department program, participating banks that offer new loan terms are supposed to put homeowners through a three-month trial period. If the homeowners make timely payments and meet other conditions, the terms are supposed to become permanent.   But a pair of lawsuits filed in U.S. District Court in Boston this past week claimed Bank of America and Wells Fargo were violating those rules. 

In the Massachusetts cases, the lawsuits describe a Kafkaesque scenario in which the banks have been holding up the mortgage loan terms because of missing paperwork that they either won’t identify or never required in the first place. 

For instance, homeowners Odalid and Wilfredo Bosque, according to one suit, entered the trial period from October to December of last year, but after they “timely made each of the payments,” Wells Fargo did not offer a final agreement. The Bosques were told that they did not submit their paperwork, but when they called the bank, agents purportedly told them “there is no paperwork missing.” Meanwhile, they continued to receive calls from the collections agency. 

Wells Fargo issued a statement saying the bank has “diligently” worked with homeowners to complete the loan modifications for customers who meet the loan modification guidelines. ”Unfortunately, not all customers who enter a HAMP trial ultimately qualify for the program. In these instances, we work to determine if another foreclosure prevention option is available to them,” the written statement said. Rossman said that his borrowers qualified. 

Under the program, banks get $1,000 for every modification, and then they can receive $1,000 a year for up to three years. Borrowers, too, can get $1,000 a year from the government under the plan, though the incentives don’t kick in until after the three-month trial. The program is meant to reduce monthly mortgage payments to 31 % of income. 

Government statistics from January show Bank of America has offered the modifications to nearly 330,000 homeowners, but it made only 12,761 permanent. Wells Fargo has made 188,749 offers and made 17,652 permanent. There’s a gap between those figures for most banks. J.P. Morgan Chase, for instance, made more than 222,000 offers, but sealed 11,581 of them.

Category: Foreclosure news, HAMP, Loan Modification News, Mortgage News, foreclosure prevention, home loan modification | Tags:

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