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Loan Mod Program Still Sputtering, Despite Attempted Fixes

Homeowners attend an April 2010 mortgage workshop in Oakland, Calif.  (Justin Sullivan/Getty Images file photo)New data released Monday by the Treasury Department shows continued delays and disappointment faced by homeowners in the administration’s mortgage modification program.

190,000 homeowners remain stuck in trial mods that have lasted over six months, still waiting to hear whether they’ll receive a permanent modification. Most of those homeowners will likely be dropped from the program.

Even homeowners who’ve successfully obtained a permanent modification have done so after months of waiting. The average trial modification at the servicer with the worst delays, JPMorgan Chase (the second largest in the program), has lasted over seven months before becoming permanent. Under the program’s guidelines, the trials are supposed to last only three months. The prolonged trials hurt homeowners by damaging their credit, increasing the balance of their mortgage, and preventing them from saving for the possibility of foreclosure.

Here is our interactive breakdown of the data. It shows which mortgage servicers are primarily responsible for the continued logjam.

The overall numbers for the program remain bleak: 1.24 million homeowners have begun a trial modification since the program launched last year. But so far more homeowners, 436,053, have been dropped from the program than have received a permanent modification, 340,459.

How Long A Permanent Mod Took
The average trial length for those that converted to permanent mods at the four largest servicers.

Servicers Avg. Trial Length at Conversion (months)
JPMorgan Chase subsidiaries 7.4
Bank of America (incl. Countrywide) 5.3
Wells Fargo Bank, NA 4.9
CitiMortgage 4

Source: Treasury Department

Since the beginning of the program, we’ve reported on problems homeowners have encountered with their servicer – lost documents, delays, and costly errors. Although Treasury Secretary Tim Geithner sharply criticized servicers for these problems earlier this year, so far it’s been all bark and no bite from the administration. The Treasury has yet to penalize any servicer for breaking the program’s rules.

Last month, administration officials said they’d extracted a promise from servicers that they would clear their backlogs by the end of this month. That seems unlikely, given the current pace.

The Treasury count of about 190,000 homeowners stuck in limbo is only a modest improvement from the 265,000 homeowners the government estimated last month were in limbo. In a conference call with reporters Monday, Herb Allison head of the TARP, which in turn oversees the loan mod program, said that it would "take another month or two" for servicers to work through their backlogs. He added that the level of homeowners being dropped from the program would remain high as those homeowners received their final answer.

Homeowners can be dropped because they fail to keep up the payments or because the servicer deems them ineligible. In the conference call, Allison attributed the high cancellation rates to the fact that some servicers had put homeowners into trials without requiring them to document their income. The Treasury changed the program’s rules earlier this year to require up-front documentation.

Given the high level of homeowners who are being dropped from the program, the Treasury has put new emphasis on what happens to those homeowners. About 49 percent have received modifications completely outside the government’s program, according to the new data. (PDF) Such modifications are not bound by the rules of the program and the terms vary from servicer to servicer. Some modifications don’t even lower payments: a portion even increases them. A report issued earlier this year by regulators (PDF) found that about 82 percent of private modifications decreased monthly payments (only half were substantial cuts, by 20 percent or more).

This program has become a travesty because the banks have had no accountability. However, I notice they have collected hundreds of millions in incentives.

Same story, different day. I don’t hate the banks, but I hate the way they play footsies with our government. They are large political contributors and it always pays off for them. (usually at consumers and/or taxpayer’s expense)

WEll done Paul! I have read several such articles today and they all make it seem like it is the homeowner who is choosing to drop the program or the homeowner who is failing some other way. IT IS NOT THE HOMEOWNER. It is the banksters. No one is regulating what they do, and they are getting away with ineptitude of the highest degree. Chase IS one of the worst. I had to get SIGTARP involved before they would give me a permanent modification after 18 months of trying. Thankyou for this great reporting.

Barbara -

Good response - Chase is an absolute nightmare!  If you don’t mind me asking, how did you get SIGTARP involved?  I’ve called the Dept. of Treasury & did receive a return call stating they were “looking into it.”  Chase continues to “misplace” my docs, haven’t even offered a HAMP (they told me “we don’t follow gov. guidelines and have our own programs”).  I’m a teacher, have a VERY stable job, separated in 2008 & am trying to keep my home for my children.  Their idea iof a “modified payment” is still 49% of my monthly gross income.  The next rep. blamed the investor (Ginnie Mae), whose website CLEARLY states the opposite.

Thanks for all of the good information, Paul!

MEC - I wrote a letter to Chase (Dimon et al) and also sent it to SIGTARP at this address:

Office of the Special Inspector General for the Troubled Asset Relief Program
1500 Pennsylvania Avenue, NW Suite 1064
Washington, DC 20220

I am not sure if that address is what did it or not, but I do have a permanent HAMP mod right now.

Also - I’d recommend you joining a new forum at http://www.beingmiddleclass.org. We are trying to help each other in our various stages of this nightmare, whether just starting, in limbo, or fighting foreclosure…

Thank you, Barbara!  I’m at my wits end with Chase & it sounds as though you were, too.  They didn’t even offer a HAMP even though my mtg. is an FHA loan.  Then, different response from EVERY rep. I spoke with.  I also cc’d Dimon & Thode (VP) the 4th time I sent docs in.  Funny - they cashed my check & sent the return receipt back (stamped with Joe Cowan’s name - no clue who he is) - no response otherwise, though.  These banks have to be given more than a slap on the wrist.

I’ll definitely join that forum as well.  Anything we can do to help others get through this nightmare is a good thing.

Thanks again!
Maureen

Chase is screwed up. I found out after six months of trying to get a modification that I was denied because I make to much money and should be able to afford the loan.  I am self employed and had to submit two years of tax returns, bank statements and all kinds of financial information. Somehow they determined that my income was 3 times what I actually make. I was told it was based on five months of bank deposits.  The only way I can get close to the number they come up with was to take my gross receipts from business, out of which I pay empoyees, office rent, consultants, and business expenses, then add that to my personal bank statement deposits, which includes income from my business gross recipts. Plus on the personal statments there are deposits from loans I am taking to pay my mortgage. It’s the craziest thing I can imagine.  All of this after being disconnected multiple times and one employee trying to tell me that my INCOME has no effect on the INCOME expense ratio.

THANKS FOR THE ADDRESS FOR THE OFFICE OF THE SPECIAL INSPECTOR GENERAL IN WASHINGTON. I WAS TOLD BY CHASE AFTER MUCH DOCUMENTATION,EMAILS AND FAXING AND PHONE CALLS THAT EVERYTHING LOOKED GOOD.  THEN OUT OF THE BLUE, I RECEIVED THIS LETTER STATING I DID NOT LIVE IN MY HOUSE AND I WOULD BE DENIED A LOWER INTEREST RATE.  WHAT A SHOCK TO ME.  A SPECIAL NEEDS BUS PICKS MY DISABLED WIFE UP EVERYDAY FROM THE HOUSE THAT CHASE STATES WE DO NOT LIVE IN.  LETS FACE IT, THEY DO NOT WANT TO LOWER INTEREST RATES!  THE GOVERNMENT NEEDS TO WAKE UP!!!!!

This article is part of an ongoing investigation:
Foreclosure Crisis

Foreclosure Crisis: Banks and Government Fail Homeowners

Banks and the government have fallen short in helping homeowners in danger of foreclosure.

The Story So Far

Systemic failures at the country’s banks and mortgage servicers have exacerbated the most severe foreclosure crisis since the Great Depression, and government efforts to limit the damage have fallen short. ProPublica created an unrivaled database of homeowners who have faced foreclosure, opened a Facebook page to encourage homeowners to share their stories, wrote profiles of some of them, and incorporated their experiences into our reporting. We also provided a comprehensive rundown of the numbers behind the crisis.

More »

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