This home in San Antonio facing foreclosure without imminent relief
The Obama administration’s mortgage relief plan provided help to only 7% of borrowers who signed up last year, another black mark for the struggling program.
The plan was announced with great fanfare 11 months ago, but has done little to stem the foreclosure crisis or its drag on home prices. A record 2.8 million households were threatened with foreclosure last year, up more than 20% from a year earlier, RealtyTrac reported this week. Home prices, meanwhile, are down 30% nationally from the peak in mid-2006
As of last month, only about 66,500 homeowners of the 900,000 enrolled had received permanent relief last year, the Treasury Department said Friday. Another 46,000 have been approved and should be completed soon.
Under the program, homeowners in financial difficulties can see their mortgages modified to make them more affordable. Interest rates can be reduced to as low as 2%, the length of the loan can be extended, or the principal balance reduced.
Borrowers initially receive temporary modifications. They are supposed to become permanent after homeowners make three payments on time and complete necessary paperwork, including proof of income and a letter explaining the reason for their financial hardship.
The mortgage companies say they have struggled to get homeowners to return the necessary paperwork. The government is pressing the 102 companies participating in the program to do a better job. But many lenders, including the nation’s largest, Bank of America, continue to perform poorly.
BofA has completed modifications for only 1.5% of the more than 200,000 borrowers it has enrolled, while other companies are processing applications much faster. Ocwen Financial and Carrington Mortgage Services, have completed modifications for more than 40% of their enrolled borrowers.
“Some of the banks are just doing a better job,” said Michael Barr, an assistant Treasury secretary. “You have some banks that really did step up to the plate quickly … and others whose results were disappointing and who need to do much better.”
Rebecca Mairone, a Bank of America executive, said the bank is stepping up its efforts, sending notaries door-to-door to get signed documents back quickly.
Article continues below
Wells Fargo has completed modifications for about 7% of its borrowers. But the company projects only about half of the 74,000 borrowers who completed at least three trial payments by the end of last year will wind up being approved.
The rest either won’t send back all the required documents or will be deemed ineligible according to the government’s formula. Collecting the documents up front would make the process much easier, said Mike Heid, co-president of Wells Fargo’s mortgage division.
“You could make a better decision for the consumer right up front,” he said.
Nevertheless, homeowners and housing counselors say navigating the bureaucratic maze often seems impossible.
The nation’s economic woes have made more borrowers fall behind on their payments. More than half of the borrowers approved for a loan modification have seen their income cut, according to the Treasury Department.
Unemployment, now at 10%, is expected to remain elevated for the whole year. Industry executives and housing advocates alike have been in talks with the Treasury Department to develop a program to aid the unemployed, but nothing has been rolled out yet.
Via USA Today