Mortgage help hits paperwork snags
A Wells Fargo Home Mortgage branch in Brooklyn, N.Y.
TEXT OF INTERVIEW
Bill Radke: In a few hours, President Obama will deliver a speech about how his administration can push this recovery along. He's thrown a lot of resources that way -- bailouts, stimulus spending and efforts to get lenders to modify mortgages and help people stay home. That mortgage help has proven trickier than expected and today, the House Financial Services committee is looking into that. Here with the story is Marketplace's Ashley Milne-Tyte, joining us live from New York. Hi, Ashley.
Ashley Milne-Tyte: Hi, Bill!
Radke: Why aren't things working out with the loan modification program?
Milne-Tyte: Well, a lot fewer people than the administration hoped have actually signed up. I mean, we've all heard the stories about people trying to call their loan servicers and just not being able to get through. So that is part of it, but it turns out only 30 percent of the borrowers in trial-payment plans have actually given in all the paperwork they need to qualify for a permanent loan modification.
Radke: Why? Why wouldn't people turn in their paperwork?
Milne-Tyte: Well, OK. So one theory is these forms can be very complicated, confusing. So, you know, filling them in correctly is a bit of a job. But I spoke to University of Maryland business professor Peter Morici a bit earlier, and he says there's another good reason that this could be happening:
Peter Morici: Many of the folks seeking modifications don't have the jobs and incomes necessary to qualify for permanent loans even under generous terms. Going permanent requires validation of those incomes, and often folks can't deliver.
So when you apply for a permanent modification, you have to give written details about your income -- something you didn't have to do to get the temporary modification. You need to submit tax returns and things like that. So it may be that many borrowers know they just don't have the wherewithal, so they're not handing in those forms.
Radke: Very interesting, that House Financial Services Committee meeting is today. That's Marketplace's Ashley Milne-Tyte, live from New York. Thank Ashley.
Milne-Tyte: You're welcome.