After years of fighting for a home loan modification, Carlos Lovera has given up.
The Bakersfield bookkeeper hasn’t had the means to make his $2,600 monthly mortgage payment since his pay was reduced and his wife went on disability. Plus, he owes more than the house is worth because he bought during the real estate boom, then refinanced and opened an equity line to add a swimming pool and landscaping.
When a balloon payment came due last year, Lovera threw up his hands. He hasn’t made a payment since September, and he’s done sending duplicate documentation and getting nowhere.
“I have a 700-page file I’ve been sending to these people since 2006,” Lovera said. “I can’t get past the customer service people in India. Those people have no decision-making authority.”
While some homeowners have successfully negotiated with lenders and loan servicers to modify home loans, most borrowers seeking relief say they’re spinning their wheels.
Since the real estate crash began, far more borrowers have lost homes to foreclosure than have obtained modifications.
The Service Corps of Retired Executives, or SCORE, has retired real estate professionals who occasionally advise troubled borrowers. They say it’s nearly impossible to make any headway because at large financial institutions, one division doesn’t know what the other is doing. That leads to financial institutions ignoring their own promises and issuing conflicting instructions.
SCORE volunteer Richard Buehrer said he knows a Bakersfield woman whose bank said in writing that it would not offer her house in a foreclosure sale while her modification application was pending, but she was put out, anyway.
The woman declined a request for an interview, but her bank, Chase, said it is very unlikely something like that could happen because federal rules prohibit foreclosing while a modification case is still open.
Chase Home Finance and its parent company, J.P. Morgan Chase Bank, are participants in the Home Affordable Modification Program, or HAMP. That’s a government program administered by the Treasury Department that offers banks financial incentives to modify existing first lien mortgages, provided they follow strict guidelines on how applications are processed.
Over the last 18 months, Chase has added 8,000 loan counselors and other staffers to work with struggling homeowners, and nationally has opened 51 Chase Homeownership Centers where customers can meet with mortgage counselors in person, said spokeswoman Eileen Leveckis.
Texas-based American Home Mortgage Servicing owns bookkeeper Lovera’s mortgage. The company did not return a telephone call requesting an interview.
The mortgage industry has repeatedly said it is doing its best to help at-risk homeowners, but the unprecedented volume of people who need help has hindered efforts to move them through the modification process quickly.
The government cannot force banks to modify loan terms or write down principal on loans for homes that have lost value, said Treasury Department spokeswoman Andrea Risotto.
“From Treasury’s perspective, we are only given the authority to run a voluntary program,” she said. “A mandatory program would require an act from congress.”
That said, the incentives are making a difference, Risotto insisted.
As of October, nearly 1.7 million trial modification plan offers had been made since HAMP’s March 2009 inception.
About 550,000 permanent modifications started during the same period.
Moreover, a recent report from the Office of the Comptroller of the Currency found that HAMP modifications are outperforming traditional modifications in home retention.
Risotto nevertheless conceded that the pace of modifications hasn’t been as fast as many would like.
“These are organizations that were never set up to help homeowners,” she said. “They were set up to collect. It’s a very, very big ship we have to turn around, and it’s recognized that California is distinctly challenged. It’s no longer the subprime loans that are failing there. It’s people who are unemployed or under water.”
SCORE volunteer Joe Newton said he thinks banks are dragging the loan modification process out deliberately.
“They ask you to submit the same documentation over and over again,” he said. “The reason is they’re looking for a discrepancy, any contradiction they can find to justify turning down the request.”
Newton also accused banks and servicers of sometimes encouraging consumers to miss payments, ostensibly so that a request for new loan terms will be taken more seriously.
“They tell you they won’t give you a modification until you miss a payment, so the borrowers stop making payments but they never get the modification,” he said. “They just go into default and lose their home.
“Borrowers need to know that when you start missing payments, the foreclosure process starts and once it gets going, it’s very hard to stop.”
Matthew Perry is president of the Central Valley chapter of the California Association of Mortgage Professionals. He used to do volunteer work helping troubled borrowers get loan workouts, but he stopped, “partly because I’m incredibly busy, but also because it was just exasperating,” he said. “It’s an incredible amount of work that half the time doesn’t do any good.”
Perry said the blame can’t be placed solely with lenders and servicers. The Treasury Department has to sign off on HAMP modifications before financial institutions can approve them, and in some cases Treasury officials were the ones insisting on a foreclosure over a modification, he said.
Perry added that he feels badly for anyone who is losing their home, but he finds people who are in trouble through no fault of their own more sympathetic than those who “used their houses as ATM machines.”
“If borrowers are irresponsible, there’s no reason the banks should have to cover that,” Perry said.
Yet all borrowers deserve an answer one way or another a lot sooner than they’re getting one, said Angie Trigueiro, owner/broker of Titan Real Estate and president of the Bakersfield Association of Realtors.
“I routinely see cases where it’s six months to a year to get a loan modification approved, and even assuming lenders are legitimately short-handed because of the volume, six months to a year is much too long.”