Systemic failures at the country's banks and mortgage servicers have exacerbated the most severe foreclosure crisis since the Great Depression, making it extremely difficult for struggling homeowners to win a loan modification. Government efforts to limit the damage have fallen woefully short.
Treasury Secretary Tim Geithner has finally acknowledged the depths of the problems with the administration's mortgage modification program. But in testimony before Congress this week, he offered no new solutions.
The millions of struggling homeowners seeking mortgage modifications commonly encounter confusion, errors and months of delay. ProPublica has now matched 140 journalists nationwide with some of those homeowners to help tell their stories.
As expected, the number of homeowners being denied permanent mortgage modifications has increased sharply. And some 367,000 homeowners remain in limbo, stuck in trial modifications that have lasted longer than they are supposed to.
ProPublica's home loan modification matchmaker has 100 journalists signed up so far, and about half of those already have homeowner clients whose stories they can tell.
The administration has been saying that the Making Home Affordable program “will help up to 3 to 4 million at-risk homeowners avoid foreclosure." But the number of expected loan modifications is actually much lower than that.
Under the government’s foreclosure prevention program, trial periods for mortgage modifications are supposed to last only three months. But some homeowners have waited nearly 10 months to learn whether they will get permanent modifications.
Some 97,000 homeowners have been stuck in trial mortgage modifications for longer than six months -- nearly two-thirds of them with JPMorgan Chase. But the Treasury Department says its lenience with the loan servicers is about to end.
Chase Home Finance has rejected some mortgage modifications because it considered the homeowners' hardships to be temporary. The Treasury Department has since barred that practice, but those homeowners are left struggling to avoid foreclosure.
The troubles of a Florida homeowner show how the loan modification program isn’t working as it should for people who are struggling to pay their mortgages but have not fallen behind. Servicers are concentrating on those in default, and say they don’t have clear guidance on how to screen borrowers who are not yet in default.
The administration’s big mortgage modification program features $50 billion worth of carrots – but the stick part has been largely absent. Today, the Treasury Department made a vague threat of unspecified penalties against companies that don’t play by the rules of the loan-mod program.