Journalism in the Public Interest

No Penalties for Mortgage Company with Worst Loan Mod Backlog

Saxon Mortgage has the largest proportion of homeowners caught in modification limbo, yet has not been subject to any government penalties.

Jeanenne Longacre said she received a letter from Saxon Mortgage saying she was approved for a loan mod, but the final terms never came. She says she lost her home because of Saxon's errors.
Last week, the government released data showing that there’s a big problem at Saxon Mortgage, a subsidiary of Morgan Stanley. Of all the mortgage companies participating in the administration’s mortgage modification program, Saxon has the largest proportion of homeowners caught in modification limbo.

The program, which provides incentives for mortgage companies to modify loans to an affordable level, has been plagued by delays and disappointing results. About 1.2 million homeowners have begun a "trial" modification, which is supposed to last three months. But less than a quarter of them have emerged with a real, lasting modification. (Here’s our backgrounder on the program and problems with it.)

As of April, about 265,000 homeowners were caught in trials that had lasted more than six months. Nowhere is that backlog worse than at Saxon, a mid-sized subprime servicer based in Texas that was acquired by Morgan Stanley in 2006 and has had long-running customer service problems.

Few of Saxon’s trials have converted into lasting modifications. As of the end of April, Saxon had put 40,000 homeowners into trials, but only about 11,000, or 27 percent, had received a permanent modification. Far more had either been dropped from the program (16,000) or were still waiting for a final answer after being in the trial for longer than six months (10,000).


The Four Mortgage Servicers with The Biggest Trial Backlogs
Servicers Est. # "Aged" Trials % of Active Trials that are "Aged"
Saxon Mortgage Services 9,839 76%
JPMorgan Chase 85,678 72%
U.S. Bank 2,064 58%
CitiMortgage 26,375 48%
Total for Program 265,015 42%

A close look at Saxon provides a window into problems with the program itself, in particular a glaring lack of oversight from Washington. While the government set up the program, it relies on mortgage companies to actually perform modifications. So far Washington has shied away from penalizing those servicers that have failed to follow the program’s rules or underperformed. Indeed, despite widespread problems among mortgage servicers and frequent tough talk from Treasury officials, who have often threatened penalties, the government has yet to issue a single one.


A spokeswoman for Saxon said that the company has been regularly audited, as have other participants in the government’s program, and that the reviews had uncovered no "material issues."

For homeowners, on the other hand, the consequences of servicer problems can be all-too-real. Some homeowners say they lost their home because of errors by Saxon.

The country’s largest mortgage servicers are attached to the biggest banks like Bank of America, JPMorgan Chase and Wells Fargo, but a number of mid-sized servicers like Saxon are stand-alone companies or subsidiaries of other banks. As of 2008, Saxon serviced over 340,000 loans.


According to the Better Business Bureau, Saxon Mortgage Services requests that consumers with a complaint contact Robin Chrostowski, Assistant Vice President of the Customer Solutions and Innovation Team, at 817-665-7862 or email to resolve the issues prior to filing a complaint with the Better Business Bureau.


The company already had problems before the administration launched its mortgage modification program in April 2009. As the Wall Street Journal reported last July, Saxon ranked last among 20 servicers in a Credit Suisse analysis of how many subprime loans each had modified. The Better Business Bureau had given the company an "F" rating, based on a profusion of consumer complaints.

But the company was among the first to sign up for the government program when it launched in April, 2009. In the first few months, Saxon put tens of thousands of homeowners into trial modifications. In a November press release, Saxon CEO Anthony Meola boasted that Saxon was leading all other servicers in the number of trials it had begun.

The Treasury Department had set the rules of the program to encourage servicers to rapidly enroll homeowners. Servicers were allowed to accept homeowners on the basis of their "stated" income, what a Treasury official described as "a wing and a prayer." The financial information would be verified later, after the trial began. While well-intentioned, the policy resulted in an enormous backlog of trials—homeowners who had been given temporary modifications and were waiting months for a final answer — and Treasury changed the program rules this spring to require verified income information up front.

Consumer advocates say that homeowners who are denied modification after making several months of trial payments are often worse off than if they’d never started the trial at all, because the process damages their credit and they’re prevented from saving for the possibility of foreclosure.

At Saxon, many homeowners seem to be caught in that limbo because of mistakes and delays at the company. John Riggins, the CEO of the Fort Worth Better Business Bureau, said that the biggest complaints about Saxon are that the company has misapplied payments or lost documents sent as part of the modification process. Saxon employees often blame computer problems or a lack of staffing, according to the complaints, which number 208 in the past year.

Jennifer Sala, a spokeswoman for Saxon, said the backlog was not caused by a lack of capacity, but resulted from a "careful review process" that "can take a considerable amount of time." She added, "We want to afford our customers every opportunity to avoid foreclosure."

Saxon has hired about 330 new full-time employees in the past year, she said, increasing the staff by 50 percent. Riggins of the Better Business Bureau said that the complaint volume had improved since last year, but that major problems remained. Saxon has improved only from an "F" to a "D-." rating.

There are other signs Saxon has been struggling to handle the volume. In April, it transferred the servicing rights for about 38,000 loans to Ocwen, which specializes in servicing troubled loans. "Normally the reason for selling loans to Ocwen is you don’t want to hassle with them anymore and they’re delinquent," said Guy Cecala, the publisher of Inside Mortgage Finance. Some of the loans transferred were in the middle of the modification process.

Sometimes the communications from Saxon can be bewildering. Barbara Niederstein of Fayetteville, Ga., said she has twice received letters saying she was being dropped from the program. Both letters cited missing documentation as a reason, but she says she was never told it was missing. Saxon has threatened to pursue foreclosure. Niederstein says that hours spent on the phone with a housing counselor and Saxon employees has at least postponed that for a month, even if the confusion has yet to be cleared up.

Jeanenne Longacre and her husband Robert. Jeanenne Longacre says she lost her home because of Saxon’s errors. She says Saxon wrongly set the trial payments at a level Longacre and her husband could only muster for a few months, and then booted her from the program when she couldn’t keep up the payments. Her house was ultimately sold out from under her after she says she received an assurance the sale would be delayed.

For months, her husband had been struggling to find steady employment when Longacre lost her job with California Blue Cross in February 2009. They were behind on their mortgage payments and faced foreclosure.

The pair, in their 50s with grown children, had been in the house for 10 years, but had refinanced in 2006 into an adjustable-rate loan with New Century, the now-defunct subprime lender. The Longacres were underwater on their mortgage, with their Los Angeles home worth about half as much as they owed.

Longacre says Saxon’s first error with her modification came with the level of the couple’s payments. The modified mortgage payment was set at $3,400, about $1,400 lower than the couple’s payments had been, but at a level they could maintain only with the help of temporary severance she was receiving. That severance would run out in August, just two months after her trial began in June.

Sala, the spokeswoman for Saxon, said she could not discuss Longacre’s case because company policy prohibited discussing customer information.

Trials are supposed to test the homeowner’s ability to make the reduced payments for a prolonged period of time. But Longacre says she always knew they would be able to make the payments only for a few months. By the time August, September came around, we started struggling," she said. "It’s ridiculous paying that kind of money when you don’t have it."

Still, Longacre kept paying. After August, the third month of the trial, came and went with no news, Longacre began calling Saxon regularly to find out what was happening. For months, she says she couldn’t get an answer. She was occasionally asked to send in a new document, but then the wait would continue.

Finally, she spoke to a negotiator in January this year, the eighth month of her trial. He told her she’d be approved for a permanent modification and that the payment, based on her family’s verified income, would be much lower, just $1,300 a month.

"I was so excited," Longacre said. "I thought a miracle had happened."

But her excitement was short-lived. She received a letter from Saxon in early February saying she’d been approved for the modification, but the final terms never came. When she called to ask about that, she says she was told she had to make the trial payments for January and February or she’d face foreclosure.

The couple had missed those payments because their money had finally run out, she says. But even though Saxon had set their permanent modification at a level far below her trial payments, she was dropped from the program for not making all of her trial payments.

In March, she received a notice that Saxon would auction her home on April 1. She hired a lawyer to negotiate on her behalf, and it seemed like foreclosure had been temporarily avoided when a Saxon employee said the sale would be postponed until May in order to provide more time to work out another solution.

Longacre thought the auction had been deferred until a man knocked on her door in early April, saying that he represented the new owners of her home and was offering her money to vacate. The home had sold for $302,000, less than half of what the Longacres owed on the mortgage.

"That home was the only thing we had. I put it everything that I own into that home." She currently lives in an apartment with her husband.

As we reported earlier this month, mistaken foreclosures can result from a lack of communication within the servicer itself. In Longacre’s case, she says she was not provided a denial letter or given an opportunity to otherwise avoid foreclosure, as the federal program’s guidelines require.

Consumers advocates say the program does not offer an effective recourse for homeowners to redress servicer wrongs. Treasury officials say that homeowners in Longacre’s position should call the HOPE Hotline, which is staffed with housing counselors, for help. Advocates say that’s been ineffective, and have long complained about the lack of a formal appeals process for homeowners.

Longacre’s case also reflects on a problem faced by the hundreds of thousands of homeowners who’ve been caught in prolonged trials: whether they must keep paying after the three-month period expires, and whether mortgage companies can deny modifications if homeowners miss payments while they’re in limbo.

The Treasury Department has given conflicting answers for that question.

The program’s guidelines say that borrowers remain eligible for a permanent modification "regardless of whether the borrower failed to make trial period payments following the successful completion of the trial period."

Despite that apparently clear meaning, a Treasury spokeswoman told ProPublica homeowners were required to continue the payments "even if the period was extended to allow additional processing."

Alys Cohen, of the National Consumer Law Center, said that’s not how consumer advocates have understood the program’s rules. "The program rules are clear: a homeowner is required to make trial payments only until the effective date of the permanent modification, which is three months after the beginning of the trial period."

Four other Saxon customers told ProPublica that they’d been disqualified for missing the extended trial payments. Sala, Saxon’s spokeswoman, said the company follows the program’s guidelines. It’s unclear if there will be any consequences for Saxon for any errors or rule violations. The Treasury has hired Freddie Mac to audit the servicers participating in the program, and so far, as Saxon’s spokeswoman has said, auditors have not flagged any "material issues" at the company. The Treasury spokeswoman said some information from the compliance reviews will eventually be made public, but none was available now.

So, follow the money!  Is any of Obummer’s good staff a part owner of this company?



The US Treasury has no idea what really is going on behind closed doors with regards to The Making Home Affordable Program. Yes it sounds like great help for those struggling to save their America Dream.

Look at the numbers. Not the homeowners with trial offers made by banks/mortgage companies, because that’s a joke. We are talking permanent modifications to these homeowners. WHO HAS BENEFITTED FROM THIS PROGRAM???


Washington, this is how the story goes. Whether the cause of a delinquent mortgage was due to lost jobs, illness, death or divorce in a family, or maybe victims of predatory lenders looking to fatten their wallets, knowing these homeowners could never make the payments. The fact of the matter is it HAPPENED.


Now they contact their lenders for help. Packages are sent to be completed along with required documentation to be returned by a certain deadline. Trust me when I say this, the documentation IS being sent not only on time but with every last piece of paper they could possibly want to review.


Now the phone calls begin. What would you say is the average hold time to speak with a person in the Home Retention Dept.?(Washington just question any homeowner.) So after you have been on hold long enough to have cleaned the bathrooms in your home, you are being informed all your requested documentation has not been sent in. How could this possibly be you say to yourself? I know I checked and double checked and had someone else check it for me. Seems funny, but I am under a great deal of stress. So I sit down and resubmit the MISSING OR UNSIGNED DOCUMENTS THEY CLAIM WERE NOT RECEIVED. Phone calls need to be made again. Well do I stay home from work, if I am one of the lucky ones in this country to be employed, so I can be on hold AGAIN? Look on the bright side the bathrooms need cleaning once more. Months go by; my stress level has escalated beyond belief, praying they will consider my request under this program. GUESS WHAT??? Not the letter I was hoping for. Dear Customer—your mortgage has now been transferred. We now are your new lender. (Oh my God did I read something about the Feds shutting them down or that that the lender is bankrupt?) Please contact us regarding your mortgage. We may be able to assist you under THE NEW MAKING HOME AFFORDABLE PROGRAM. Now I am informed a whole new package needs to be completed. So where is all my personal information that was sent to my prior servicer? (Tax returns, copy of my driver’s license, bank statements, pay stubs, copy of a utility bill (That’s so they can see I still reside at the premises. Where was I going?)  Seems to me with all this information floating around lost, it probably has landed in the hands of those that would have a grand time with IDENTITY THEFT. Any one else worried about this?


So I am back to square one, paperwork, long hold times, and new packets to be signed and returned by a deadline. No problem, my family loves our home and if we are one of the fortunate ones that this program will help then it is worth it.

But hold on one minute. Same old story, missing paperwork, unsigned documents? Do they forget I spent months playing this game with my prior servicer?


Let’s go back to the phone calls. Why on Monday can I call and speak with someone in Home Retention and be given one story, and yet on Thursday a whole new story or different information regarding the progress being made on my modification? Seems to me in this day and age updates within their systems should be effortless. No one is on the same page.


Trial payments are a story in itself. You better have planned for the incompetence within these financial institutions. Not one of them is capable of crediting your account. Hopefully you have saved every bit of information regarding your payment. (i.e.  certified receipt of acceptance at their office date and time and who signed for it.) Anything you as the homeowner can do to prove those payments were sent. One full month of calls every other day to correct THEIR error. Good God save us all. If a financial institution has such poor record keeping this nation doesn’t stand a chance. Yet they continue to put the BLAME on homeowners.


So where do we as homeowners stand with our elected officials, and the Treasury Dept. in regards to this PROGRAM to help keep our country from complete ruins? Certainly don’t expect the mortgage companies or banks to work with the struggling homeowners. Lenders truly are the only ones on the receiving end of this program.



Homeowners stand up for you. Refuse to allow these lenders to keep blaming YOU for the reason this program has failed. They have no intention to do anything more than keeping their hands out for the Government Money. Contact every elected official in your area, and tell Washington WE HAVE HAD IT.


No I am not an angry homeowner. I am just someone trying to work on their behalf (at no cost to them).

One more question? Where do you expect to house all these homeless people? As for all the banks and mortgage companies, and I have dealt with MANY, you are a disgrace benefitting on the monies allocated to help struggling families across this country. You employ IDIOTS. But then again that WORKS TO YOUR BENEFIT.


With all due respect MR. President you were looking for some suggestions for improving this program and the crises that is widespread in this country?

The answer is pretty simple BEHIND CLOSED DOORS of these financial institutions you will find the answers to the problem. They are fooling everyone including WASHINGTON.







Juan A. Befree

May 28, 2010, 5:50 p.m.

Here’s an idea…if you can’t pay your mortgage, then GET OUT. You don’t own the house… you never owned the house…and unless your creditor wants to allow you to stay in it (by agreeing to some sort of “mortgage modification”), you should leave and go rent a place somewhere else.

Seriously, you agreed in writing to a specific financing arrangement with your lender…if you’ve failed to live up to that agreement, then that’s it: you’ve FAILED. Admit it…move out…and get on with your life.

Trying to prop up home prices (that somehow magically went up >100% in 6 years, and then only 20% in the last three years) will not work…and all this whining about how tough things are for you (through no fault of your own, of course - since it’s always SOMEONE ELSE’S fault when your get-rich-quick scheme doesn’t pan out, right?) is just plain pathetic.

How about all of us sensible Americans, who decided to continue renting rather than paying a ridiculous price for a house that we surely would have difficulty paying for unless everything went right (which never happens)? IS there any reward for being sensible and financially responsible in the U.S. these days? Quit trying to prop up home prices with “bail-out programs” for making mistakes and/or failures. Can you say “moral hazard”?

chelsie davidson

May 30, 2010, 4:32 a.m.

  Our loan modification nightmare is identical to yours. almost completely! I don’t know what is going on with these banks, and what they think they will benefit from trying to steal our homes and money, because I will not let them break all these laws, and be rewarded for doing so with our home and hard earned money. Karma and accountability is right around the corner, and it bites every single time in the end. Walk away my **s!

Anthony Galeano

May 31, 2010, 1:46 a.m.

You are so right, I have work on 20 loan mods with different lenders and the story is always the same, resumit paperwork, long waits to talk to the wrong department, no authorization after I fax it 20 times.

What is wrong??? everything. We need to do something this is not right.

Come on is time that the goverment looks into this programs and start to do something.

Come on lets get this home owners modify, before all hell breaks loose.

Chase Home Financiakl is the absolute worst.  They’ve “misplaced” my documents at least 5x, haven’t sent me a statement for my “new” payment, which is STILL 41% if my gross monthly income.  Everyt ime I call, I get a different response from a different person who then tells me the last person I spoke with was “misinformed.”  Are you kidding me?

At least 5 or 6 reps. from Chase have told me “we don’t have to follow the government plans because, even though your loan is FHA, Chase has it’s own rules & programs.  We are at the mercy of the investor, Ginnie Mae.  Sorry Ma’am.”

SO, do you want my mortgage payment or not???  I’ve done EVERYTHING they’ve asked me to do and much more.  So now what?

AND, do I need to even mention how Chase ADDED 34K tio my principal balance, therefore putting me $100K underwater, making it IMPOSSIBLE for me to refinance & remove my ex from the note since I’m keeping my home for my children?  I’d like to know where the 15K in forbearance payments went as they were NOT credited to my account. 

Calling the HOPE hotline is useless as they don’t offer any information or assistance either - they keep saying to call Chase, which I have numerous times, and if I don’t get an answer from Chase to call HOPE again - I feel like I’m stuck on an amusement park ride just going in circles and getting nowhere!  All I want to do is keep my home for my family and I’ve more than demonstrated my ability to do so.  I needed a modification because I separated from my partner due to his inability to hold a job.  He relocated to another state and I kept our home for my children.  I’ve been in the same school district for many years and have a very stable income and job. However, even the modified payment exceeds 41% of my monthly gross income.  Chase refuses to help or follow any rules set forth by the government.

Juan -

You need to look at the whole picture because some of us were faced with legitimate hardships that caused the need for a modification in terms.  Are there people out there who bought beyond their means? Yes.  Are there people out there who bought impulsively and are just looking for a way out?  Yes.  BUT there are also people who WERE responsible and have either lost their jobs due to the economy.  There are also hard working people who either divorced or separated.  THOSE are the people who ARE being responsible by doing EVERYTHING possible to keep their homes but need help doing so due to unforseen circumstances.

Get the story straight and give hard working, responsibe people some credit.  Until you’ve walked a mile in their shoes, don’t judge.

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.

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