Loan modifications: Few become permanent
Almost 35,000 troubled South Florida homeowners have gotten a mortgage loan modification under an Obama administration program designed to reduce foreclosures. But that is less than 5 percent of the borrowers who qualify for them.
The figures from a Treasury Department report Thursday offer little good news for the hundreds of thousands of Florida homeowners who are behind on their mortgage loan payments and seeking help from their lenders.
Banks and companies that service home loans are moving more slowly to renegotiate loans in Florida through the Making Home Affordable program than in the rest of the nation
And most of the borrowers who get new loan terms are only receiving a temporary break.
Nationwide, 24 percent of nation’s 3.3 million troubled home loans have been modified, the Treasury Department said. In Florida, the rate is 13.5 percent through November.
In a loan modification, the lender typically agrees to cut the interest rate to make the loan more affordable for a limited time period for borrowers who have lost jobs or suffered from the economy’s downturn.
Under the Making Home Affordable Program, the Treasury said modifications are reducing monthly payments by an average of $550 a month.
But few people hang on to their new deals. The Treasury said that of the 728,408 modified loans nationwide so far, only 31,382 became permanent modifications.
The problem: Homeowners have to make timely payments and show that they still qualify for the loan after a three-month trial period ends. Banks say few homeowners make it through both hurdles.
Even if they are making the payments on time, about half do not provide the necessary paperwork to make the loan permanent, according to a statement from JP Morgan Chase. “It has been a struggle,” according to Charlie Scharf, head of Retail Financial Services at Chase.
Homeowners say the real reason is lenders are disorganized and difficult to work with.
“I have submitted all the papers three times. I’ve been going through hell, with a promised modification and then the bank said no, really I don’t qualify,” said Claudia LeCompte of Boynton Beach. She said she has been seeking a loan modification since January. Earlier this week, after an inquiry from the Sun Sentinel, her loan servicer HomEq told LeCompte that she will get a modification.
“There is such a grand lack of communication between servicers and their clients and their legal departments and even within their own branches,” said Alexander Fernandez, director of homeownership preservation at Neighborhood Housing Services of South Florida, which does counseling for troubled borrowers. “Also, a lot of servicers don’t have structures” to handle the crush of borrowers.
Major lenders Chase, Bank of America and Wells Fargo, say they are restructuring loans at a fast clip through the Making Home Affordable program and other programs. The three major banks issued press releases this week saying they have collectively modified more than 1.3 million home loans total nationwide.
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But Treasury is pressuring lenders to do more. It cannot force banks or servicers to restructure loans, because modifications are voluntary.
The Making Home Affordable program, launched in February, has a goal of helping 3 to 4 million homeowners to get lower mortgage payments.
One out of five of troubled loans eligible for the program is in Florida. The state is the nation’s second busiest market for loan modifications under the Obama program.
Florida also had the nation’s second highest foreclosure rate in November.
The Treasury report offered the first look into modifications at the local level. It noted that the Miami metro area is number four among large cities for loan modifications. In metro Miami-Fort Lauderdale, the Treasury said 34,668 loans have been modified. That represents 4.8 percent of eligible loans. The metropolitan area does not include Palm Beach county.
In Florida, there were 667,754 home loans eligible for restructuring under the Making Home Affordable program in October. Statewide, 90,575 have been modified , the Treasury said.
Almost 35,000 troubled South Florida homeowners have gotten a mortgage loan modification under an Obama administration program designed to reduce foreclosures, but that’s less than 5 percent of the borrowers who need them.
The figures, from a Treasury Department monthly report on the Making Home Affordable program, offers little good news for Florida’s troubled home borrowers. Lenders and companies that service home loans are moving more slowly to renegotiate loans in Florida than in the rest of the nation.
Nationwide, 24 percent of nation’s 3.3 million troubled home loans have been modified, the Treasury Department said Thursday. In Florida, the rate is 13.5 percent through November.
The Making Home Affordable program, launched in February, has a goal of helping 3 to 4 million homeowners get lower mortgage payments through loan modifications.
But few borrowers are getting more than a temporary break.
While the loan modifications are reducing monthly payments by an average of $550 a month, the Treasury said Thursday that of the 728,408 modified loans nationwide, only 31,382 became permanent after the three-month trial period ends.
The problem: Homeowners have to make timely payments and then show that they still qualify for the loan. Banks say few homeowners submit all the needed documents.
About half of those who make the payments don’t provide the necessary paperwork to make the loan permanent, according to a statement from JP Morgan Chase. “It has been a struggle,” according to Charlie Scharf, head of Retail Financial Servcices at Chase.
Homeowners say it’s a different story, however, with lenders not really willing to help them. “I have submitted all the papers three times. I’ve been going through hell, with a promised modification and then the bank said no, really I don’t qualify,” said Claudia LeCompte of Boynton Beach. She said she has been seeking a loan modification since January. Earlier this week, after an inquiry from the Sun Sentinel, her loan servicer HomEq told LeCompte that she will get a modification.
Harriet Johnson Brackey, the personal finance columnist for the Sun Sentinel, is an award-winning business reporter. Her columns for 2008 were named "The Best in the Business," a national award chosen by her colleagues at the Society of American Business Editors and Writers.
Comments
Nonsense.... there are many people that have submitted the required paperwork: by certified mail only to be told that it has never been received. There is NO mandate for any of these lenders to re-negotiate loans and there is no real incentive. There are good people who purchased reasonable priced homes and subsequently are having difficulty with these goons. One person was told to cut expenses...they have their mortgage, home and car insurance, electric bill and one cell phone. No credit card debt, no health insurance and do not qualify for unemployment (they are working reduced hours) and no food and do not qualify for food stamps by %40.00 over the acceptable earnings one WEEK out of 12 weeks audited. WELLS FARGO OFFERED THEM A MORATORIUM> meaning for 6 months they dont have to pay. At the end of the 6 months one payment over 6500.00 would be due. The cost of their current monthly mortgage x 6 months.
We need to find a solution, especially for the people who DID NOT PURCHASE EXTRAVAGANT HOMES WAY BEYONDS THEIR MEANS.
Posted by: graykol | December 10, 2009 7:42 PM
Sorry pal, I do nt agree.
Did you read your mtg application when you purchase your home? Was it true and correct? Did you take the time to find out what was going to happend after the loan adjusted? And I have much more questions like that.
95% of the people applying for loan mod DO NOT DESERVE THEM!!!!
The way I see it, the market needs a stabilization, wich can only be done by whipping out all this loans. Bank should foreclose faster, that would bring everything up to speed again. Forget abilouts and hand outs!
Posted by: Walter | December 11, 2009 8:17 AM
graykol,
If you didn't purchase beyond your means, why can't you afford your mortgage now?
Posted by: or30313 | December 11, 2009 11:42 AM
Tell me how this makes sense...if you have 2 homes, the second can be modified....BUT your primary can't...ignore Walter. And or30313 is the economy in a recession or mini depression? What's changed? figure it out
Under present law, mortgages that are secured only by a principal residence may not be modified, but mortgages on investment property may be modified.
It should be noted that some homeowners may be able to obtain a mortgage modification under present chapter 13 or chapter 11 bankruptcy law by changing the use of their home from being their principal residence to investment property. A modification in chapter 13 or chapter 11 bankruptcy may involve a reduction in principal balance and changes in interest rate, monthly payment and term.
What has not changed is this:
More Of The Same...No Change In Sight
http://tinyurl.com/ye5alal
Posted by: dan | December 14, 2009 1:12 PM
Hello,
FIRST: Most people TOLD to submit the documents do indeed SUBMIT THE DOCUMENTS.
I came to imagine, that the fax machine at Litton Loan Servicing was connected to a paper shredder having BOTH mailed and FAXEd stuff they CONTINUED to state was missing from the file, for MONTHS.
They often do NOT keep track of what they already have properly. I would FORCE them to go over what, understandably, became a HUGE case of paperwork, and then they typically would AGREE that stuff they CLAIMED was NOT THERE, in letters-- would be acknowledged as BEING THERE, in phone calls. Seemed to me a phoney paper trail was being produced, so I started writing requests for verification that they HAD various documents they had requested MORE THAN ONCE from me. They also will send the requests to produce additional documents in a form letter, that DOES NOT ACTUALLY COVER THE DOCUMENT THEY ARE LOOKING FOR AT ALL.
After months of runaround, and being circumvented from TALKING DIRECTLY WITH LOSS MITIGATION, I FINALLY learned that they required CERTAIN SPECIFIC WORDING in a letter. A letter HAD been sent, which they kept saying they NEEDED. Eventually, it turned out they needed the letter to provide information, the original letter had NOT provided. This took literally MONTHS of my time and theirs to FINALLY resolve, since they WON'T let the people doing the MODS, speak to the people seeking the MODS.
When you call they try to have their customer service dept, just put you off with lines like "It is IN review" "You must be patient" etc...
NOW ONTO THE COMMENT THAT PEOPLE FIRST BOUGHT HOMES THEY COULD NOT AFFORD...
At the TIME I bought the house I COULD afford it, don't look NOW, but there are a lot of newly unemployed Americans. There are a lot of people whose bills have gone up, but whose wages have declined, or flat lined, resulting in inadequate resources remaining for BOTH the mortgage and their basic costs of living.
It is high time that MINIMUM WAGES ADJUST WITH THE COST OF LIVING IN AMERICA.
Posted by: Cindy in Orange | December 14, 2009 2:27 PM
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Posted by: Loan Modification | December 16, 2009 6:44 AM
What a travesty and disservice the banks are doing to the Homeowner. I am losing my home in CA, because Chase decided that they would not do a permanent loan modification, despite the fact that all the criteria was met including trial payments of a loan mod.WHEN IS THIS GOING TO STOP? WHEN ARE PEOPLE GOING TO FIGHT BACK?
Posted by: LISA BERGER | December 17, 2009 1:26 PM
Update on Bernanke's "Exploding" ARM
Bernanke bought in May 2004 for $839,000. He had a 5/1 ARM for $671,200 at 4.125% that adjusted to 12 month Libor in June of each year after his fixed period ended. To calculate his rate you take 12 month Libor on that date and add 2.250%, it can't adjust more than 2% in any one year due to restrictions on the note. He also had a purchase money second $83,900 but for some reason I can't find the interest rate on that one, nor do I see an ARM rider for it so it could very well be fixed. Both notes indicate they are amortizing loans.
But Effective Demand's information raises several questions: Why did Bernanke refi? What did he mean by "explode", and was his home underwater when he refinanced since he bought in 2004 and apparently borrowed 90% LTV with only 10% down.
http://tinyurl.com/yaf3kej
Posted by: doubletalk | December 18, 2009 5:45 PM
They modify terms all the time..its that they do not want to for the primary residential market:
Elizabeth Warren Named 'Bostonian Of The Year'
It's the year end so we're getting more of these made public. This honor at least was heartily deserved. A feisty (yet polite) graceful, academic-civil servant who effectively utilized the only weapon she was handed (in fact, 'not handed') by Congress: the media bully pulpit. She was given a grand title and little else. The rest was pure moxie.
http://tinyurl.com/yjzejrg
Posted by: stay informed | December 20, 2009 2:45 PM
HAMP seems pretty DAMP
Serious U.S. mortgage delinquencies up 20 pct
* Serious delinquencies up from prior quarter, year
* Many loans modified under HAMP, but few permanent
WASHINGTON, Dec 21 (Reuters) - Serious delinquencies among U.S. prime mortgages rose nearly 20 percent in the third quarter from the prior quarter, as the percentage of current and performing mortgages fell for the sixth consecutive quarter, banking regulators said on Monday.
The report by the Office of Comptroller of the Currency and the Office of Thrift Supervision, which are part of the Treasury Department, covered about two-thirds of all U.S. mortgages.
It found 3.6 percent of prime mortgages -- those made to the most credit-worthy borrowers -- were seriously delinquent in the third quarter. That was more than double the year-ago quarter and up nearly 20 percent from the 2009 second quarter. The report defined "serious delinquencies" as those loans 60 days or more past due and loans to delinquent bankrupt borrowers.
Big U.S. banks and thrifts carried out 2.4 million home loan modifications, trial period plans or payment plans in the quarter, spurred mostly by a government plan offered by President Barack Obama, according to the report.
Most came from the government's Home Affordable Modification Program. Mortgage servicers carried out 274,000 trial plans in the third quarter, up 240 percent from the second quarter when the plan was launched.
But only 1 percent of those had been converted to permanent modifications as of Sept. 30, 2009, the report said.
A major cause of this disconnect is that loan servicers are finding that many borrowers who initially appear to qualify for the program do not, according to the report.
The Treasury Department has been pressuring lenders and mortgage servicers to do more to ease the harm from rising foreclosures.
Loan modifications made outside the new aid program fell in the third quarter by nearly 8 percent, the report said.
Posted by: dave | December 21, 2009 7:27 PM
Dec. 23, 2009, 12:01 a.m. EST · Recommend · Post:
Winning the trial, losing your house
Trying to prevent foreclosure while waiting for a permanent loan modification
WASHINGTON (MarketWatch) -- Question: I have also made trial payments under the Making Home Affordable program. But my house truly was in foreclosure and I spoke with an attorney. Your advice in your column is wrong. They can foreclose, they will foreclose, and they are foreclosing on thousands of people who have made their trial payments every month! See previous Realty Q&A.
There is nothing written into this program that provides any penalty for lenders if they do not modify a loan. They very clearly state that you are not actually approved for the program, and stipulate that the magical approval (or denial) will happen at some unspecified future time.
http://tinyurl.com/yje9mtc
Posted by: help | December 23, 2009 12:16 AM
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Posted by: Crystal | December 27, 2009 1:17 AM
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Posted by: Loan Modification | December 28, 2009 2:49 AM
My bank has understood only one thing "Federal Complaint Filed in US District Court for Violations of HAMP" they are working with me now! Treasury HAMP guidelines were very helpful for Consumer Protection Rights.
Posted by: Don't Give Up! | January 2, 2010 11:21 AM
In response to the previous comment "if you did not purchases beyond your means, why can't you afford your mortgage now" - many individuals and families were able to cope with their mortgages then but millions of the same borrowers have been gravely affected by the the recent financial situation and the ongoing recession. They did not foresee that they would lose their jobs or get a significant cut in income. It was a shock to everyone.
Home loan modifications are designed to help this unfortunate citizens of our country. But if lenders do not cooperate, then this would be no help at all. The government claims that they will be giving incentives to creditors to make this stimulus program successful. Is their incentives not enough? Most of these banks have been bailed out by tax payers money. It is about time that they give back
Posted by: Brandon from Loan Modification Calculator | July 27, 2010 7:06 AM
You must be able to prove that your mortgage servicer received all your supporting documents. Mail USPS certified mail, return receipt requested.
NEVER FAX. That's just an excuse for them to walk over to the shredder.
We are seeing spectacular results in the courts with the REST Report as part
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