On a recent Friday morning, Wallace Farmer packed up and moved out of his Baltimore row house. After over a year of confusion and delays, JPMorgan Chase told Farmer that he made too much for a mortgage modification through the government's foreclosure relief program. That made no sense to Farmer -- he'd lost around $500 a month from two rental properties -- but he was done fighting. He recalls finally saying, "To hell with it."
Farmer is one of many homeowners who have given up on the government's mortgage modification program, which tries to help struggling homeowners by reducing their monthly payments. They say they're trapped in a bureaucratic nightmare, and even if they are offered a modification, it doesn't help enough. They stop sending checks and instead face foreclosure.
"I have been traumatized," says Farmer of his process trying to get help from Chase. "I couldn't get any closure. Nobody would tell me anything. They kept saying, 'It's in the mail. It's in the mail.'" Chase spokeswoman Christine Holevas says the bank was giving Farmer "assistance and advice about options" when he moved out.
Farmer's frustration at the delays and the runaround are common among people trying to get help through the government program. More than three-quarters of the homeowners who responded to our questionnaire said they did not trust their servicers to make a good-faith effort to evaluate them for a modification. The Treasury Department has acknowledged that the stress and confusion of the process has caused some homeowners to give up.
Based on the accounts of more than 350 homeowners, University of Arizona law professor Brent White recently wrote that homeowners who make intentional decisions to stop paying their mortgages often feel "anxiety and hopelessness about their financial futures and anger at their lenders' and the governments' unwillingness to help."
When these homeowners take a look at the hard numbers of their finances, many say a modification isn't enough help. The delays can often push homeowners further into debt because unpaid principal, interest and fees accrue during trial modifications. And nationally, one in five homeowners, like Farmer, are "underwater," meaning they owe more on their mortgages than their homes are worth. Farmer figured that, since he owes $101,000 more than the market value of his home, he'd essentially be renting for the next 20 years. "I cannot be burdened with that amount of negative equity," he says.
Even those who successfully get permanent modifications end up owing 50 percent more, [PDF] on average, than their homes are worth, according to the Government Accountability Office.
The government program lowers monthly payments by reducing interest rates, extending the term of a mortgage, and then, if necessary, offering "principal forbearance," which moves up to 30 percent of the amount owed to a balloon payment at the end of a loan. Around a third of permanent modifications in the program have principal forbearance [PDF].
In March, the Treasury Department announced a new program to promote not just postponing principal payments, but actually wiping away some debt for loans with balances more than 15 percent higher than the house's value. Under the program, mortgage servicers are "encouraged" -- but not required -- to forgive principal.
After a year of faxing and resubmitting documents, one Florida homeowner finally threw up his hands and faxed his mortgage servicer a picture of his naked backside with a note saying, "Please see below for my updated financial information." The homeowner says he got a modification the very next week.
ProPublica's Paul Kiel and Olga Pierce contributed to this story.
Have you given up on getting a modification? Please use the comments section below to discuss with other homeowners. And if you haven't already filled out our questionnaire, please tell us your story.