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Fallout: The Financial Crisis

Help calls bog down mortgage program

Tamara Keith Jul 10, 2009
Fallout: The Financial Crisis

Help calls bog down mortgage program

Tamara Keith Jul 10, 2009


TESS VIGELAND: The number of homeowners facing foreclosure rose again in June. And that’s prompting lots of questions about the government’s Making Home Affordable program. The Obama Administration launched it back in March and told banks to try to lower mortgage interest rates so people could keep up with their payments.

Tamara Keith reports that so far the results have been mixed — at best.

Tamara Keith: Michelle McKiver’s days are filled with a whole lot of this . . .

Automated voice: All of our representatives are still assisting other customers. Please hold and your call will be answered momentarily.

McKiver is a housing counselor at Neighborhood Housing Services of Baltimore, Md. The agency’s services are free to just about anyone who needs help with their mortgage. McKiver’s job: To help people keep their homes. And that means working the phones.

Michelle McKiver: Oh great, we just want to follow up with you. We know this account right now is in foreclosure and we want to know first of all, is there a sale date?

All day she talks with banks and loan servicing companies, trying to renegotiate the terms of her clients’ mortgages. And in theory it should be easier these days. The idea of the Making Home Affordable Program was to simplify the process. It gives lenders and loan servicers financial incentives to cut payments. And it trims mortgage payments down to an amount borrowers can actually afford, no more than 31 percent of their monthly income.

But McKiver says still it can be a confusing and frustrating process.

McKiver: Sometimes you’ll get someone that doesn’t know what they’re talking about and you’ll hang up and you’ll call and get somebody else. You’ll hang up and then maybe, maybe you’ll get somebody that actually knows what they’re talking about.

McKiver says it can take months for a servicer to consider a loan modification request. She says the banks and servicers she calls just seem overwhelmed.

Matthew, Bank of America staff member: Thank you for calling the Home Retention Division. My name is Matthew. Can I ask who I’m speaking with today?

In Simi Valley, Calif., hundreds of people in cubicles are answering the phones at this Bank of America call center. They’ve been fielding nonstop requests for loan modifications.

Matthew: For May’s installment you made that payment by the grace period. You were also able to make the payment for June within the grace period. Your account is current. Is there some kind of hardship that I’m not seeing?

One of the goals of the Making Home Affordable Program is to catch people before they fall behind on their payments. But borrowers have to prove they’re actually in trouble. They need to provide tax documents and pay stubs, and they can’t have too much in savings.

Tammy Tipton: Hi, it’s Tammy, Bank of America, how are you?

Tammy Tipton is one of some 7,500 people in the bank’s Home Retention Division. She’s a loan workout specialist. That means she has the ability to modify someone’s mortgage,

Tipton: Tell it to me straight. Tell me what your situation is, and I will represent you as best I can.

But it’s not all up to her. Homeowners may send their checks to a company like Bank of America, but their loan has most likely been bundled up into securities and sold to investors. Tipton uses a computer program called Home Saver to figure out whether those investors will be better off with a foreclosure or a loan modification. In most cases, Tipton says a loan modification is best.

Tipton: The investors are seeing more and more willingness within themselves to say, “We need to work with these people. We need to not say no. Assisting is better than not getting anything at all. Assisting is better than having more homes that are empty.

The next step is bringing the payments down so the homeowner can afford them. With the blessing of the investors, Tipton can cut interest rates to as low as 2 percent or take a 30-year mortgage and extend it out to 40 years.

Seems simple enough. So why are borrowers and housing counselors complaining about long waits on hold and longer waits for answers? There are just too many people in trouble. Bank of America has doubled its staff in the Home Retention Division in the last eight months. But it has more than a million-and-a-half customers behind on their payments.

Tipton says it’s overwhelming.

Tipton: I work probably, maybe, three hours of overtime a day, and maybe one Saturday a month. And I’m still swimming and drowning. But that’s OK, because that’s what we’re here for right now.

Banks and loan servicers all over the place are having a hard time keeping up. Michael Barr is an assistant secretary at the Treasury Department who helped develop the Making Home Affordable program.

Michael Barr: A number of firms are doing a good job ramping up the infrastructure they need to make this work and a number of firms don’t have that in place yet and need to do a much better job in the coming weeks.

Housing Counselor Michelle McKiver says she’s starting to see some results. A loan modification for one of her clients just went through after only a month of back and forth with the bank. The homeowner’s payments have been slashed in half.

So far, the Treasury Department says more than 270,000 loan modification offers have gone out. The Treasury doesn’t have data on how many have been accepted. But the Making Home Affordable program is supposed to help 3 to 4 million homeowners. Some of them are probably sitting on hold right now.

In Washington, I’m Tamara Keith for Marketplace Money.

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