With a rising wave of foreclosures looming, the Treasury is stepping up pressure on lenders to finish modifying home loans and to pick up the pace. Potentially exacerbating the problem is that many loans are held by servicers whose fees increase the longer borrowers remain in default.
Under the plan, companies that agree to lower payments for troubled borrowers collect $1,000 from the government, followed by another $1,000 a year for up to three years. The program is premised on the idea that a small cash incentive will induce the banks to cut their losses and accept smaller payments.
But the mortgage companies that collect payments from homeowners — servicers, as they are known — generally do not own the loans. Rather, they collect fees from investors that actually own mortgages, and their fees often increase the longer a borrower remains in delinquency.
But borrowers and their lawyers report that much of the required paperwork is being lost in a haze of bureaucratic disorganization. Servicers are abruptly changing fax numbers and mislaying files — the same issues that have plagued the program from its inception.
“People continue to get lost in the phone tree hell,” said Diane E. Thompson, a lawyer with the National Consumer Law Center.
Some lawyers who defend homeowners against foreclosure assert that mortgage companies are merely stalling, using trial loan modifications as an opportunity to extract a few more dollars from borrowers who would otherwise make no payments.
“I don’t think they ever intended to do permanent loan modifications,” said Margery Golant, a Florida lawyer who previously worked for a major mortgage company, Ocwen Financial. “It’s a shell game that they’re playing.”
Have you tried to get a loan modified through the Home Affordable Modification Program? How has it worked out? Leave your thoughts in the comments.