Foreclosure Prevention Program Still Having Trouble Preventing Foreclosures

The government program that is supposed to stop 4 million foreclosures continues to have trouble keeping homeowners in the program.

The WSJ says:

Almost 530,000 of the nearly 1.3 million government modifications have been cancelled since the program began last March. Dropouts climbed as homeowners missed payments on their modified loans or failed to turn in required paperwork.

Nearly half of the homeowners who cancelled their trial modifications have found mortgage relief outside the program, the administration said, while less than 2% of cancellations have resulted in foreclosure.

The Obama administration said the effort would help up to 4 million people hold onto their homes. But critics say the program isn’t on track to meeting its goals as foreclosures continue to mount.

In fairness to the program, however, we should mention that financial institutions are responsible for processing the paperwork and there have been numerous reports that they are either disastrously incompetent or willfully sabotaging the modifications.

The banks, however, say that borrowers are not providing the necessary documents and are missing payments.

Anti-Foreclosure Program Still Losing Homeowners [WSJ]

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  1. moore850 says:

    So basically a bunch of people who were underwater on high-rate mortgages were actually unable to manage even an affordable mortgage… that’s odd.

    • Duke_Newcombe-Making children and adults as fat as pigs says:

      So basically a bunch of banks that took money to provide services to these homeowners stonewalled, footdragged, and generally discouraged the people they were supposed to help until they missed payments, and still kept the Government money. Even more odd.

    • cloudedknife says:

      so basically a bunch of people who took out reasonable fixed rate mortgages find them selves so hopelessly underwater on their homes that a term extension or slight rate decrease isn’t worth staying in the home anyway.

      I was given 5 days to fill out and return my modification paperwork and when they didn’t get it back in those 5 days they mailed me a letter with incorrect business hours and then told me my case had been closed but i was welcome to start over.

      Oh, and they told me that unless i could prove that i was already behind on my payments or would be within the next 90 days, nothing would be done for me.

      It is a bad program.

    • Evil_Otto would rather pay taxes than make someone else rich says:

      So basically a bunch of people found themselves without the means to pay their bills (ie, their honest jobs) and found themselves unable to pay their mortgages, due to the disastrous deregulatory policies of the federal government for the last 30 years. So basically the new administration tried to make the situation better. So basically the banks fucking suck for not cooperating.

      So basically maybe your horse is too high and you ought to stop being such a douchebag.

  2. Toadfish says:

    Moore850: That’s not exactly accurate. My wife went through the modification process and it was a horrible pain the the butt. The lender would lose paperwork, forget to update notes and various other ‘mistakes’ that made the process MUCH more difficult than it needed to be. It also didn’t help that this lender wouldn’t allow her to actually talk to the person handling her modification. She could only talk to a low-level person that would have to email any questions to the real person and then we’d have to call back. All in all it took her 8-9 months to get it completed.

    I’m sure there are some people that are the problem, but it’s not 100%, by a long shot.

  3. Im Just Saying says:

    For what it’s worth, we have an agressive modification team here at the credit union and they have a hard time doing modifcations for people. Either the member doesn’t want to fill out the paperwork and supply the financial statements, or they do provide the financial statements and it’s found that if they stopped going to the casino, they’d have little to no problem meeting their obligations.

    And we actually WANT to do these mods. I can’t imagine what resistant banks are seeing.

    • TuxthePenguin says:

      I can second what you’ve said. I’m a CPA (as I’ve said many times before) but I also I do financial planning and advisory services. I’ve had three of my clients go through modifications. All of them were flying high three years ago… and only one has even gotten into the modification.

      The only that stands out to me is one of my clients simply refused to give them the documentation they wanted – it wasn’t anything too onerous – tax returns, most recent pay stubs from his wife, financial for his company (which I have and prepare quarterly for him… could have easily sent them). His wife and I still don’t know what’s going on…

    • grapedog says:

      i think they are resisting the desire to help, lazy would be my guess.

  4. Murph1908 says:

    Ouch. Sitting on Park Place and rolling snake eyes is game over. A total rent bill of $3800 will bankrupt any player.

    Only chance is that Car’s opponent landed on his Green or Yellow with a hotel since his last turn.

    • phil says:

      Yes. Boardwalk/Park Place is overrated; a Green or Yellow monopoly generally does better. Controlling both virtually guarantees a win.

      • Murph1908 says:

        Green is expensive to develop, though. At $200 per house, it takes $3000 total to develop them all into hotels.

        The orange/red combo, in my opinion, is the best. You are 6, 8, and 9 away from orange for anyone landing in jail And if they miss those, they are primed to hit red. It only takes $1500 to develp orange to hotels.

    • A.Mercer says:

      Well, the person could be landing on their own properties.

      I agree that Boardwalk and Park Place are overrated. When I play the computer and I get one of these I will wait for a bit and then offer a trade to the computer. Most of the times they will give everything they have just to get Boardwalk or they give me a lot for it and then max out their cash to put houses on Boardwalk and Park Place. They hit one of my properties and have to sell everything. The game is over soon after that.

      I personally like Oriental, Connectict, and Vermont. Price is low and the cost of houses are cheap. People may not get hit extremely hard by their rent with houses but I can build up faster than the properties on the other side of the board. Of course, I play like a fool and spend every single dollar as fast as I can accumulating all properties.

    • DanRydell says:

      Today I learned that there are people who haven’t figured out what a terrible game Monopoly is.

      • stormbird says:

        I used to play it with a friend and his family. He was an accountant so he always won. For the daughter, who wasn’t good at finance, I invented the ‘cute little kid discount’ where you either take the rent or one of each color money that they have, whichever is less.

  5. FatLynn says:

    I am about to jump to leave my job and go back to school, and I was told by my loan officer to just do a traditional re-fi, instead of entering the cluster@#$% of an actual modification.

  6. foreclosing says:

    We’ve been trying for 16 months. My husband’s job moved, my son and I were both diagnosed with medical conditions and had unexpected medical bills and we had a water pipe burst in our house. We called them as soon as we realized there would be a problem paying our mortgage that month.

    They have lost our paperwork, we had to re-submit because they took so long that the paperwork expired etc. etc. etc. They gave us a “decision” that had them rolling the money we had not payed for almost a year on top of our mortgage which was going to RAISE our payments over 300.00/month. I don’t know where they got the monetary figure because we had been making trial payments. We’re now waiting for a second decision that actually would give us some hope of paying.

  7. brajalle says:

    I am a foreclosure counselor – our office did/is working with about 800 clients. In our experience, small or local banks pretty much instantly solve problems – we hardly ever get referrals, the ones we have gotten are usually fixed by the time we fax the paperwork we’ve received.

    Larger banks/servicers, are another story. First, to be clear, there are a number of clients who simply won’t do what the bank wants/the program requires, or aren’t being completely honest. That being said, the vast majority of clients we have at larger/national banks/servicers are getting the run-around. You’ve never seen frustrated until billion-dollar corporations have phone systems worse than Somalia – they love to disconnect you after waiting for an hour when doing one of their endless transfers, or when you get placed on hold while they “look through” information. My record is 5 times in 1 day at Bank of America – total hold time was 5 hours. They lose documentation – I have confirmed return receipt mail and fedex deliveries that they’ve received…but they claim to have never received them. Faxes disappear. Authorization to speak on behalf of my client disappears – it’s endless. The loan company will specify what they want in a modification packet, client will send it in, and should they actually receive it, they will turn around and ask for more paperwork not in the first. Because we’ve done a ton of these cases, we always ask if they need x, y, and z additional information – oh no we don’t. Two weeks later, after 5 disconnects and 10 different answers from 10 different people, we get told their modification can’t be completed because they didn’t submit x, y, and z.

    These banks are either the most ineptly run organizations I’ve ever seen, or everybody is passing the buck in their offices. Contrast that to a local bank or a smaller servicer – we can call them up, fax paperwork directly to Jane Doe, and get an offer over the phone.

    The federal program(s) do have a few holes that potentially savable loans can fall through, they’re pretty small and involve a very small subset of clients. In general, though, the federal monies behind these programs provide sufficient incentives (IMO) for the clients who meet the guidelines to have their home saved. The banks have totally dropped the ball with a ton of these people. I have clients who have call sheets with names, ID’s, etc that go back 2 years where they’ve been given the run-around. It’s a joke what is going on. If it didn’t take 10 hours of my time to be authorized to speak to the bank and check on a client’s paperwork arriving and being entered, then we wouldn’t have such a huge backlog of cases and people might actually not end up 2 years behind instead of a few months.

    There is a tiny ray of hope on the way in the form of the Hope Loan Program – if the banks take advantage of it, it should reduce the paperwork and hold-time issues significantly. It’s in its infancy, so it has promise. The government has literally bent over backwards to try and help people – hell, our work with HUD, USDA, and certain FHA-program loans has been wonderful.

  8. pinkbunnyslippers says:

    I hate how everyone assumes that someone in the market for a loan mod is either some deadbeat spending his income on casinos and “extra-curricular” activities or someone who bit off more than they could chew and hense, “deserve” whatever troubles they encounter.

    Layoffs happen. Unemployment runs out. You’re forced to take any job you can just to put food on the table. Not everyone who enters this program (or tries to) is some asshole who bought a $500k home with a No-Doc loan. Banks aren’t making the process easily, either due to ignorance or purposeful maliciousness.

    It took me 8 months, extreme help from my Congressman, and a whole lot of perserverance on my part (calling the loan specialists every day like clockwork, keeping track of EVERYTHING, etc.) but I got through the process. It’s possible, but it’s hard!

    • huadpe says:

      All of this is true. What is also true is that people who are far delinquent on their mortgages are unlikely to be able to make moderately reduced mortgage payments.

      If you were making $150,000/yr and had a $4000/month mortgage payment, and you lose your job, once savings run out…you can’t pay that mortgage. You can’t even come close, on $1600/month unemployment. Even a very generous modification will only get you to around $3000.

      Mortgage modifications don’t work for unemployed people, except where their mortgage payments are so low that UI might be able to pay them, if they came down a bit further. But really, that means a $1000/month or less mortgage, which is likely to not be a super-sized housing-boom underwater mortgage to begin with.

      • Jevia says:

        Yeah, I don’t quite understand who these modifications were supposed to help. If one lost a job, one can’t get a modification because you no longer have “income.” If you didn’t lose your job, presumably you’re still making the same income you had when you bought the house, so why wouldn’t you be able to pay your mortgage same as before.

        It seems the only ones it could help are those few people who’s income was cut, either salary cut, or perhaps lost a job, but found another quick enough, but for less money. My understanding that most of those that have ‘dropped out’ of the program was due to failure to provide proof of income documents, which is probably because they lost their jobs and don’t have any, which is why they wanted to modify their mortgage in the first place. Duh.

        • pinkbunnyslippers says:

          Yeah, that’s precisely what BofA told me when I was going through the process. They couldn’t help me until I was working at a lower income. I was unemployed at the time, so I was like “what? Lower than 0?”

          I see why the control’s in place though – if it wasn’t there, who’s to stop someone from losing their $50k/year job for 6 months, getting a loan mod, and then a week after the mod going out and landing a $100k/year job.

          I see that this program was supposed to help people like me – swallowed whole by their house that they once really and truly could afford, but no longer can due to decreased value, negative equity and held hostage by a crummy job market.

          It’s just too bad it’s not helping more people – but like I said, I became BFF with my congressman’s secretary and he pushed hard for me. I guess it helps to have someone of his ideals in office, and I recognize not everyone is as lucky.

  9. chippy says:

    I hate that a lot of these modifications are not working out for people. From what I’ve seen (in my limited experience of watching one person try to get one), it’s really hard to get approved for one. My friend here at work lost her husband unexpectedly last year, leaving her with two kids and no life insurance or savings to live on. She tried to get a modification, only to be told that she had to resubmit her financial statements because they had lost them (two times) or that it was too long ago since she sent in the previous request for modification (this happened three times). She’s set for a court date of August 4th now for her foreclosure hearing.

    • DieBretter says:

      I know 2 families that went through with modification. The first one tried it on their own and got no where. They hired an attorney, but only after trying for 4 or so months on their own. The attorney took about 3 months or so and it was all taken care of. But this family had the exact same problems on their own that I’ve been hearing.

      The 2nd family decided to try it once there was a foreclosure hearing scheduled. The hearing came and went, the family didn’t even show up or respond to the complaint. They have 6 months from 7-15 to come up with the entirety of the loan.

      When there’s a program in place for the general public to use, it shouldn’t take having to use a lawyer to get discernible results.

  10. Mollyg says:

    I was in the program with Wells Fargo, and they canceled me for not turning in paperwork, even though I had proof that I did. I do not believe the stats.

  11. coren says:

    Nearly half of the homeowners who cancelled their trial modifications have found mortgage relief outside the program, the administration said, while less than 2% of cancellations have resulted in foreclosure.

    Sounds to me like it’s succeeding, even if people aren’t staying in the program til completion.

    Also when they say they’ll help “up to 4 million” and they help only one, that’s the goal met right there. Ideally all 4 million would get helped – but word games are fun!

  12. RStormgull says:

    I tried going through this (and eventually short sale) with Wells Fargo and they’re so keen on blaming their mortgagees. Let me tell you a few things about my experience with them.

    First off, good luck getting connected to the right department because no one knows who you are supposed to be talking to. First we were directed to WF Home Mortgage, who directed us to loans, who directed us to liquidations who tried to direct us back to home mortgage. Eventually it turned out to be liquidations who we needed to talk to.

    Second. Whatever paperwork you send them expires 60 days after they receive it. Like clockwork. No notices about expired paperwork are issued, no requests for additional paperwork unless you happen to call them and talk to a rep. This is likely intentional in the hopes that you give up or let too much time laps so their metrics can blame you for foreclosure.

    Third. They will tell you repeatedly that they are sending you packets of information when they are not. They send you nothing in the hopes that you go away and give up. When you do receive it your paperwork has expired and they need it again before they can send see if you qualify for loan modifications.

    Fourth. Everything you send them must be signed, dated, and include your loan number. Anything that you send them that does not include this information is discarded.

    Fifth. They haven’t told you everything that they need to be able to complete the modification. They will, without fail, come back and need something else…. and your paperwork has expired again, so they’ll need that too.

    Sixth. The only reason you know any of the above is because time has lapsed and you have called them. Again. To see what the status is of your modification/short sale. This is the only time they will give you information.

    Seventh. Someone has miscoded your file and they have absolutely no choice but to close the existing file and open a new one…. which requires you resending in all paperwork since the old paperwork can’t be associated with the new file.

    By now you’re pretty deep in the hole on your credit report, saving probably exhausted to try to make payments you can’t make anymore. My wife lost her job, I got transferred across the country so we had an additional rent payment to make on top of the mortgage. Oh, and I had to pay for the move, too.

    So before you, banks, go blaming all this on the folks that took mortgages that they could afford at the time. DO remember that people have had some hard times, mmkay? Like the Vegas housing market where a lot of houses are selling for less than 50% of what they sold for only a year and a half ago?

    • brajalle says:

      That’s exactly how it works. Wells Fargo, BAC, GreenTree, USBank, Chase, the list goes on…

  13. jim says:

    no job -> needs loan modification
    still no job -> loan modification fails

    the focus needs to be on the jobs

  14. Kibit says:

    Reading the comments just makes me sick. People are trying to save their homes , they are doing everything they need to do, but the large banks are making it impossible for people to get the modifications or any other help they need. Especially reading the posts by foreclosing, brajalle, pinkbunnyslippers , chippy and Rstormgull. I hope you all have better times ahead of you.

  15. stormbird says:

    “there have been numerous reports that they are either disastrously incompetent or willfully sabotaging the modifications.”

    Can we pick both? Disastrously incompetent AND wilfully sabotaging the program? Sure, billions of taxpayer money was necessary in order to keep the banks from suffering from the bad loans they made. Yes, they managed to make a profit off the bailouts. And they aren’t lending money. And are shrinking credit for individuals and small businesses. But we expect them to competently run a program designed to shrink the amount of houses they can foreclose on and sell when the market improves? Why, it’s almost like top executives go from the federal government to the banks and back again!

  16. Tony Cartman says:

    The point is that they simple don’t work. Obama tried, but the foreclosures are still out there. The situation just doesn’t change!

  17. Chaluapman says:

    I’ve been in the “trial” Program for 6 months. Provided the proper paperwork more than once. Yesterday I received a fedex envelope from the lender telling me that I was in danger of losing my modification option because…you guessed it, I hadn’t sent in the proper papers. I called the bank, they told me it was a mistake and to ignore it. I’m still waiting to be assigned to someone who can complete my modification. What a bunch of asshats.

  18. naturalblue says:

    I work for an attorney processing modifications and let me tell you – this article is dead on. For those that can persevere and get the government HAMP modification program, it’s awesome. It’s the best program out there.

    Unfortunately, banks make it EXTREMELY difficult to get a modification. I have files that I have had to resubmit 3 and 4 times because the bank “lost the paperwork” or they say that they didn’t get paperwork that they requested – even though there was never a request for it. Or they say that they need paperwork by a certain day, when they mean they need it by noon that day. The reasons are endless, and unnecessary.

    Some banks even flat out refuse to modify. Indymac, for example, makes more money if they foreclose on the property than if they modify it thanks to the FDIC’s deal with the company that owns them, OneWest Bank. So, unfortunately for everyone who has a loan with Indymac (particularly for a non owner occupied property) – you’re screwed!

    Modifications CAN be done, they just require a lot of patience and the ability to not act on your desire to murder the people at the bank.