Wednesday, December 16, 2009

One Bank's Lies, Another's Obfuscation?

The answer to the title question is a qualified MAYBE! (Obfuscate: to muddy the waters so no one has a clue about the real answer or even the question) Based on ever changing figures, the Wall Street Journal reported, in its December 11th edition, that there are nearly 5% of the homeowners in the Making Home Affordable Program ("MHAP")who have "permanent" mortgage modifications. If we go back to the beginning of the MHAP, it was estimated that there were 2,700,000 homeowners eligible. That figure did not include loans that did not fall within modification guidelines, even if they did come within the HARP (Home Affordable REFINANCE Program) structure.

The math on the 2.7 million figure equates to about 1.15% of those eligible have a permanent modification. That is substantially up from the numbers reported only 3 weeks ago but... The reality is that the Banks, including the biggest in the country (Bank of America, CitiBank, JPMorgan Chase) are not making loans or loan modifications without being forced to do so.

In my practice in western Western Massachusetts, I am dealing with a multitude of lenders, in every case, trying to save a home. While I have the occasional client who got into financial trouble of his/her own doing, the vast majority, 90-95%, find themselves facing foreclosure because of job loss, fewer hours available, ill health/death and the related medical bills, or family problems such as divorce, or some combination of these factors. ADDING TO THESE ISSUES IS THERE DEVASTATION OF BAD LOANS AND THE ECONOMIC COLLAPSE.

The only way I can get the attention of some of the lenders is to file suit. That is my last resort - whether the action is in a State court or in U S Bankruptcy Court. There is little interaction with loan workout specialists, now called Loss Mitigation Specialists, before documents, often obtained from the website, are sent to the lender. It is at this critical juncture that lenders or their servicing companies are lying or obfuscating.

All of the current articles quoting lenders as to the reason so few modifications are becoming permanent, cite the lenders as stating that only a small percentage complete all of the required paperwork, and of those, 1 out of 5 default on the "Trial Payment Period" payments. It is my personal experience that fully 50% of the submissions to the MHA program at any specific lender are LOST. I have sent 2,3 and sometimes 4 packages to the MHA department of a mortgagee/servicer before I get a set of documents that are not lost. Seldom will anyone in the servicing side say "I am sorry, we misplaced the documents we need." It is generally a form letter, received by me or my client, that states that the client did not qualify because inadequate information was provided, specifically that the package of forms was never received.

Even at that a new problem arises: after 45-60 days of waiting the documents sent are stale (outdated) or the foreclosure, which had been postponed due to the eligibility and contact under MHA, is re-scheduled. As for the default in payments - if someone receive a notice on Dec 4th that states the beginning payment under the trial period is due Dec. 1st, how can anyone comply? If I am lucky enough to get a lawyer for the lender involved, the process moves much more efficiently, as the lawyer knows the stakes for the lender.

In fairness (a phrase I am getting tired of having to use) to the mortgage folks, they are overwhelmed. No one could prepare for this number of "problem" mortgages. Okay, fine! Why then are modifications being refused by lenders? Has not the Treasury, FDIC, and the Federal Reserve, along with the "Administration" said they want the program to work, and NOW? Yes, but none of these folks tried to assist in getting a bill through the House of Representatives that would have put pressure on the Banks etc. to MAKE Homes affordable.

When the House debated a bill to allow Bankruptcy Judges to modify home mortgages, and it seemed like it would pass, but the Mortgage Backed Security holders and big investors said NO! and the spike in permanent modifications was announced to show that nothing else was needed.
On Monday the bill was defeated and I predict it will be back to business usual - just the endless loop of automated prompts from one department to another and the seemingly coordinated 45 minute wait for a representative.

Author's Copyright by Richard I. Isacoff, Esq, December 2009

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