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Few benefit from loan modification plan
A Wells Fargo Home Mortgage branch in Brooklyn, N.Y.
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Kai Ryssdal: When you add it all up, the Obama administration has set aside $75 billion for its foreclosure prevention programs. So far, though, less than 10 percent of borrowers who are eligible for help have actually gotten any. That was the bottom line today from the Treasury Department's first progress report on the voluntary mortgage modification programs it has. Voluntary being the key word there. Treasury say some banks have ramped up fast to offer lower house payments to those who can afford them. Others haven't been so fast. Here's our senior business correspondent Bob Moon.
BOB MOON: Only a tiny fraction of struggling homeowners received any relief, which may not be all that surprising for a program that's voluntary for the lending institutions. Still, that doesn't mean the government can't name and shame those it thinks aren't trying hard enough.
MICHAEL BARR: We're disappointed in the performance of some of the servicers, and we expect them to do more.
Assistant Treasury Secretary Michael Barr released today's scores.
Among the country's biggest financial institutions, Bank of America modified just 4 percent of eligible delinquent loans; Wells Fargo, six percent.
But Saxon Mortgage Services, which is owned by Morgan Stanley, lowered payments for 25 percent of eligible borrowers, and JPMorgan-Chase, 20 percent.
The Center for American Progress is one of the groups that's pressed for mortgage relief. Housing specialist Andrew Jacobavics is giving lenders the benefit of the doubt. He suggests even Bank of America, which bought troubled sub-prime lender Countrywide, might have reasons for turning in a low score.
ANDREW JACOBAVICS: It may very well be that Bank of America just simply has more difficult loans that just ultimately do not qualify. And so the fact that they have a lower rate is not indicative that they're not up to speed, but simply it's just a function of their portfolio.
Jacobavics says he takes the industry at its word that the goal of half-a-million loan modifications by November is attainable.
Scott Talbott speaks for the Financial Services Roundtable. He says the industry is committed to streamlining the system.
SCOTT TALBOTT: There isn't one-stop shopping for an application. So we're working on creating a Web portal that lets homeowners make one application online, which will help streamline the process for all borrowers.
Asked when that site might be available, Talbott could only say soon.
I'm Bob Moon for Marketplace.
First of all, if the Administration knew BofA was bait and switching promises of loan modification terms, this should mean some fairly serious abolishment for BofA that could risk their already tarnished public image.
The key of course, is getting that message to the right place to hear that complaint.
There is no way currently to do this.
The other problem is lack of public knowledge through the press of loan modification bank performance, which this article has a nice leg up on.
The press has to understand it to report on it. Resources are slim for the press; there is not time to learn about it so generally they don’t.
I am a seasoned consultant in the mortgage business. I am convinced the loan modification is the right start to replace the former product (the refinance) that facilitated market adjustment in the past.
But the loan modification model has a few fatal flaws.
One, trusting lenders/services to do the right thing after being the primary impetus that put our economy where it is, is paying the inmate to continue to steal,
Two, $1000 is not nearly enough incentive when banks have acclimated to making thousands more on each loan through their now failed refinance models that don’t work.
Three, to have any expectation that the general public is up to the task to negotiating with a sophisticated banking entity is like sending the chicken in to negotiate with the fox in the henhouse. It’s just simply not rational.
Four, the public needs their own “incentive†(cash flow) to be able to hire a knowledgeable advocate for themselves as their resources are already bone dry. After all there is overhead to hiring an arm’s length party to negotiate with what has been proven to be generally disingenuous foxes…er, lenders.
To correct the loan modification model by given incentive cash to the borrower’s side, would tend to not only stimulate the economy by correcting the borrower’s failed assets, it should add a new job description to defray unemployment ranks. It would also tend to put people sophisticated enough to advocate with banks, a voice to pressure banks to do the right thing.
There are down sides to this but, if the TARP money had been instead dispersed directly to consumers (the way the social security stipend was) that money would have instantly been funneled into the economy by a consumer back at the helm and the market would have been a way closer to putting this whole economic nightmare behind them, including the banks because their portfolios would start performing again.
BTW – the bi-weekly payment plan has been around for decades. It is not complicated. It is just math. Paying every two weeks adds an extra payment a year to their annual payment schedule (a 13th payment). Take that 13th payment, divide it by 12 and add that amount to your monthly payment to go towards principal. Or set up auto pay in your own bank. You don’t have to pay someone $350 to do this when you can do it for free.
If one is not disciplined enough then pay them to do it for you.
Citimortgage presented me this attractive offer. I can make bi-weekly payments of half my monthly payment, so I can save money?! But get this, the offer doesn't end there. I can enroll in this program for a nominal fee of $350, with a couple bucks for each biweekly transaction. Wow, what a deal! When I ask why can't I just split up my yearly payments into 26 biweekly payments, they say their software isn't built that way. But it can accept 13 monthly payments on a biweekly basis if I pay $350?! What type of software feature is this?! If you want to make a killing in the market, this is the niche. Loan companies have assumed monopoly power over consumers that have ruined credit from the recession. They can't switch banks, they have to put out or get out. Find a way to steal this market and you'll make billions. (I have)
I was outraged and disgusted last night when I heard Jacobavics and the statement that he "takes the industry at its word." Why on earth would we trust these people??? I'm sure many people had the same reaction. Stringent oversight is essential.
i contacted B of A in May to see if i could get help with my mortgage. I received great terms only to be told B of A could not do those term. I than received new and even better terms only again was told no that BofA could not honor them. My third letter with term i can not live with . In five years i will be paying more than i am now. In May i had not miss a payment or was late. i was told not to pay June, july or august. now if i reject the third set of terms i have to come up with June and july or i will be in default. please someone help me
