The News outlets are SLOWLY getting to the truth

[Stuart C]

Hope it's ok to post this. Maybe others could add other stories that pertain to us? Moe, this ok?

Permanent mortgage modifications delayed - Oct. 16, 2009

Special Report The Rescue Long-term Obama loan modifications prove elusive

Treasury department extends mortgage aid trial period by two months. But loan servicers are having trouble compiling all the needed paperwork.


By Tami Luhby, CNNMoney.com senior writer
Last Updated: October 16, 2009: 11:43 AM ET

Is Obama's foreclosure rescue plan working?

Homeowners in trouble are having mixed results applying for President Obama's foreclosure prevention plan. CNNMoney.com readers tell us their tribulations and triumphs trying to get their loans modified or refinanced. View photos

NEW YORK (CNNMoney.com) -- Half a million people are now in trial modifications under the Obama administration's mortgage rescue plan, but getting them permanent help is proving to be difficult.

The foreclosure prevention plan, which reduces eligible borrowers' monthly payments to no more than 31% of their pre-tax income, requires homeowners to make three on-time monthly payments before they can receive a permanent modification.

Loan servicers use the trial period to verify borrowers' income and ascertain whether they can handle the reduced payments.

But servicers say they are having a tough time collecting the necessary documents to determine whether troubled borrowers should receive permanent adjustments. They contend that some homeowners aren't sending in their tax returns, bank statements and pay stubs.

Borrowers, on the other hand, complain that their paperwork is being lost.

The Obama administration recently made several changes to the program to give the transactions more time and streamline the plan.

Last month, it extended the trial period by two months to give servicers more time to collect the documents. And last week, it announced that servicers could automatically move qualified borrowers into permanent modifications without their signatures.

The Treasury Department said these moves should make it easier for qualified borrowers to get permanent modifications, according to a spokeswoman.Officials are discussing ways to make it even easier, she said, including allowing servicers to access tax records directly from the Internal Revenue Service.

It is in servicers' interest to convert eligible borrowers since they only get incentive payments when the modification is made permanent, the Treasury spokeswoman said. Plus, if the government finds institutions to have wrongly deny swaths of people, it could impose penalties.

"Treasury is also working intently with servicers to help ensure that they execute in helping more borrowers convert to permanent modifications," she said.

Who's to blame?

Servicers say they are wrestling with getting the completed documents they need to put borrowers in permanent modifications.

At JPMorgan Chase, for instance, representatives call and send letters to homeowners detailing what they still need to mail in. The bank says it has improved its system for collecting paperwork so that lost documents are not the problem. The issue, it says, is that homeowners are simply not sending in what's required.

"At first blush, you'd think that for people who've made three payments, it would be a no-brainer to get the paperwork in," said Tom Kelly, a Chase (JPM, Fortune 500) spokesman. "But for some people, it just hasn't been the case."

A Citigroup (C, Fortune 500) spokesman also said the documentation process has been challenging.

But many borrowers and housing counselors contend that homeowners send in their documents multiple times, only to be told their files are incomplete. This has been a problem that's plagued the program from the beginning.

0:00 /4:47Foreclosure fix not working
On top of that, housing counselors report that banks are sending homeowners forms with the wrong income data listed, which could jeopardize their chances of getting a permanent modification.
One homeowner's problem
Many borrowers are growing increasingly nervous as they near the end of their trial modification periods with no decision from their servicers.
Jim Copley, a Minneapolis homeowner, was given a trial modification five months ago. He found he could no longer afford his $1,650 monthly payments after the housing collapse decimated his home-painting business.
After receiving a temporary adjustment that cut his payments to $955 a month, Copley sent his servicer,Bank of America, all the required income documentation in June. He was shocked to learn two months later that there was some paperwork missing. He called again and was told that his file was, in fact, complete and that he should continue making reduced payments until he was told otherwise.
"Every time I talk with them, I get a different story," said Copley, a single dad who now makes a third of his previous income selling meat to restaurants. "No matter what I do, I can't get any kind of an answer."
A Bank of America (BAC, Fortune 500) spokeswoman said that Copley's file is complete and that he should receive a decision about a permanent modification soon.
It remains to be seen how many people will qualify for permanent modifications.
"If the trial modifications don't convert to permanent modifications, then the program won't be considered a success," said Barry Zigas, director of housing policy for the Consumer Federation of America.
Have you turned into a saver because of the recession? How have your saving and spending habits changed? Please email your stories to CNNMoney.com and you could be part of an upcoming article. For the CNNMoney.com Comment Policy, click here.

[fla borrower]

Thanks Stuart very informative and accurate.

[kbspots]

Okay I am totally confused. How do you know if you have applied for a loan mod under the Obama plan or just a run of the mill loan mod from the bank. I just read this article that I am replying to. And if the US Treasury is only giving incentives to banks who complete mods, then I do not understand why these banks are holding up all the loan mods. Maybe I could find the answers to my questions if I read this entire website for a whole day. Time, Time. I am just confused about everything. Do I need to apply to someone other than my bank for a loan mod to get in the Obama plan?

[Stuart C]

What have you done so far? Have you gone to that HAMP site to see if you qualify? Checked to see if you're Fannie Mae or Freddie Mac?

[davephx]

There are usually two entities involved with your mortgage.

The servicer and the investor

The servicer makes more fees on foreclosures than mods. But they have an obligation to the investor (who may be Fannie/Freddie or a private investor). That is why the NPV (Net Present Value) Test which is a "safe haven" if positive to show a mod is better than foreclosure or vice versa.

If foreclosed the servicer also gets more fees for managing the now owned property on behalf of the investor.

The servicer (who you get your bank statement from and is responsible for mods) should tell you if its HAMP or not and you should insist on being tested for HAMP qualification before any inhouse mod.

In some cases you go thru the whole trial and find out the investor doesn't accept, especially if a private investor. Fannie/Freddie as investors sometimes is easier and depending on situation may not need to approve if meet the guidelines. But this gets very messy since weird things are popping up even from Fannie/Freddie as investors.

You can go to Does Fannie Mae Own Your Mortgage? Loan Lookup Tool to see if Fannie owns your loan. Not sure about Freddie but Fannie owns more than Freddie

[heidi79]

Your current bank has to be signed up with the government to do the hamp, plan, they will let you know when you call. If you are set up on 3 trial payments and recieve a package with the official making home affordable logo on it, then that is the plan, but the bank you currently pay will tell you right away if it's the hamp program they are putting you in.

[caldwellb02]

Hi kb. It seems to me that banks are deciding on what type of mod - if any is best for them - not us. So if you clearly apply under the Obama plan they may deny you; but there may be another product the bank has that will work.

I have NO idea other than the profit motive as to why they are delaying. As Moe as said on other threads, the Lenders are the banks' customers when it comes to mortgages - not us. (Unless the bank is also the lender). The banks have little motivation to grant mods if the lender doesn't see any improvement on the bottom line. The mod incentive is one thing. The weighing of a bank's loss in offering a mod vs. foreclosing is another. It's about making money for their shareholders.

I would highly recommend embracing the idea that it is confusing, ridiculous, and seemingly unethical. Then try everything you can to save your home if that is what you want.

You need to have a job. If you don't its probably impossible to get a mod.
It needs to be the home you live in. Some folks have gotten mods for rental and investment properties, though, so not always a deal breaker.
You need to be paying more than 31% of your income in mortgage payments

That said, I fit all of the above and have been trying to get a mod for 9 months and have nothing. Still under review.

It is a conundrum and completely without reason from our point of view. I believe it is purely the profit motive that holds it up. Each lender is different. The servicers are different. It is meant to befuddle us all.

It takes persistence, and many who have been persistent have been successful. Many haven't. I'm in the limbo stage. If you want to fight for your home, recognize that there is little rhyme or reason to why they do what they do. Educate yourself. If one person tells you one thing, call another. Don't take no for an answer till you see it in writing and then keep on fighting. AND DOCUMENT EVERYTHING.

This is a real problem, kbspots, and we need to really be pushing. and pushing. and pushing. You could call NACA (naca.com) , you could work through one of the HUD agencies. Any one of those might have the magic that gets you through this. Your bank may be your lender - or not. But they have the ultimate say. Our government has let us down because it's all in the hands of the banks.

that said, I'm fighting and will keep on fighting and wish you the best. I have two full time jobs - the one that I get paid for and this one. It takes that kind of time. Sorry. And good luck.

[davephx]

On the brighter side - There is no huge pressure on the servicers to do more mods. The media has gotten the problems aired fairly well.

The Congressional Oversight Committee report last week is outstanding and shows all these problems.

Treasury is doing all it can making things easier and really trying to get servicers to get more trials into permanent mods. But there is no "enforcement" power in the law to require compliance with all the good directives from Fannie/Freddie/HAMPAdmin and Treasury. Just "oversight" by Congress and Freddie Mac.

But there is now huge public/congressional and media pressure. Treasury imposed reporting requirements to show which banks are doing what with the program to shame them into getting final mods done.

The HAMP program with helpful Tresuary directives is very good for what it is designed to do. It is the implemenatation by the servicers that is a huge issue. The Admin/Treasury is fighting as hard as they can under the law to make the program work at least for those it was designed for.

It does not address those unemployed or too low income. That takes billions more but is under discussion to use some of the excess unused and repaid TARP funds for that purpose. But it will take I've head about another $40billion to address the unemployment issue in any meaningful way.

[snapple candy]

" And last week, it announced that servicers could automatically move qualified borrowers into permanent modifications without their signatures."

Now this makes me nervous. I want to see what it is I am agreeing to.

[davephx]

I think that only means the process can be sped up since they do not need the INVESTORS approval. That is what often takes a long time.

I read that notice also but forget if it was just from Fannie or from Treasury or HampAdmin to applies to everyone.

[snapple candy]

Thanks Dave.
That makes more sense in that context.

[summerbreeze]

Banks are greedy, they are setting us all to failure so they can get their third round up of stimulus package, they are using us all to get what they want. Please watch they video and it might be helpful to understand why banks are giving us hard time. America's Economy Reformed? | Bill Moyers | PBS Video
Notes: this is from public broadcasting channel own by the public and not the banks like CNN, MSNBC, FOX, and so on.

[Riley18]

Originally Posted by summerbreeze

Banks are greedy, they are setting us all to failure so they can get their third round up of stimulus package, they are using us all to get what they want. Please watch they video and it might be helpful to understand why banks are giving us hard time. America's Economy Reformed? | Bill Moyers | PBS Video
Notes: this is from public broadcasting channel own by the public and not the banks like CNN, MSNBC, FOX, and so on.

It does seem like the banks have an angle going that keeps us in the house taking care of it for them. They can't get much out of selling them, but they hate to do anything that would benefit the consumer. So they play games and stall. They have all the time in the world, and we just want to get on with our lives. It is cruel and unusual punishment and yet we are somehow the bad guys whenever the media focuses on the situation. There is always that caveat whereby someone has to mention people buying more than they could "afford", but the real focus should be on the predatory banks who set people up to fail. They also ignore those of us who put down 20% or more down but lost income due to the economy.