The Chicago Reporter is a publication that reports on race and poverty in Chicago. This issue’s cover story is about mortgage modifications and the struggles that homeowners face when trying to access the Obama Administration’s refinance program. Apparently, banks are so incompetent that it can be almost impossible to actually modify your mortgage.

The article tells the story of a small business owner who thought he would always be able to pay his mortgage, but whose work dried up with the economy, and his wife, who was laid off from her full-time job. The husband was injured on the job, and the medical bills piled up.

They tried to apply for a mortgage modification, but the process has been a complete nightmare. The family called their bank, Bank of America, in December of 2008 and said they needed a lower payment due to loss in income. The bank said no because they had not yet defaulted. It told them to call back when the Obama Administration’s program was scheduled to begin.

4 months after applying, the family still didn’t have an answer.

“I begged the guy at the call center to tell me what was going on with our application,” Sofia said. The representative said that “we had been denied in March. … I started crying on the phone and asked him, ‘How can that be when I’ve talked to you guys a half-dozen times since then?’”

They told her to start over. So she did. Then they said they didn’t get her paperwork. So she sent it again. After another month, the family had run out of money and were unable to pay their full mortgage payment. They just started sending whatever money they had.

Among the 25 lenders participating in the government’s loan modification program last year, Bank of America had the most homeowners—1 million—who were more than 60 days delinquent on their mortgage. That was more than double the number of the next closest lender, JPMorgan Chase.

The Hernandez family’s frustrating interactions with Bank of America representatives is indicative of the hamster wheellike situation many defaulted homeowners and their housing counselors have found themselves stuck on during the past year. Lured by the promises of affordable mortgage payments, borrowers contact their banks in droves to avoid foreclosure.

But after sitting on hold, answering extensive financial questions, photocopying paystubs and bills, and waiting for an answer for weeks and months on end, many are told to resubmit their applications or paperwork over and over again.

The Report says its not an uncommon experience.

Now, one year after the March launch, a Chicago Reporter investigation shows that many Chicagoans have less than a 50-50 chance of getting those loan modifications—even with the help of a government-certified homeownership counselor. In addition, the foreclosure rates for the city remain high, and even when people do apply for a loan modification, hundreds still end up losing their home.

Through interviews with national and local housing experts and counselors, the Reporter found that banks are understaffed and inundated with applications, making some homeowners wait up to nine months to find out if they’ve been approved. In other cases, banks have routinely lost homeowners’ paperwork, forcing them to apply numerous times, or bank employees have incorrectly entered income data, disqualifying applicants. In addition, some banks are beginning the legal foreclosure process as they weigh whether to approve customers’ loan modification applications. Some people have been lucky enough to get approved for a temporary loan modification only later to find out that it will never become permanent.

The Hernandez family is still waiting.

Home Loan Purgatory [Chicago Reporter]

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