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August 4th, 2009 (Modified on May 30th, 2017)

Update1 When All Else Fails, Try Shaming Servicers into Cooperating

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It’s no secret that the Obama Administration feels that mortgage lenders and servicers aren’t doing enough to help those facing foreclosure.

After enduring months of criticism on their lack of production, 25 mortgage-servicing companies came to Washington to tell their side of the story and offer some suggestions on how to make the process better. Whatever explanations or suggestions were offered, they obviously weren’t good enough (emphasis added):

The Obama administration wants to shame the mortgage industry into doing a better job of helping borrowers avoid losing their homes to foreclosure.

By publishing the names of companies that are lagging behind in the government’s plan to ease the housing crisis, officials are counting on public outrage to get the industry on track. The Treasury Department on Tuesday plans to report on the progress of loan servicers — companies that collect mortgage payments — that are in line for up to $50 billion in subsidies.

Update1: The results are in: the Treasury’s report indicates that while some large firms are operating below average, others haven’t even begun modifying loans:

The government on Tuesday detailed big disparities among the 38 companies that have signed up for the program. Overall, only 15 percent of the 2.7 million eligible homeowners have been offered assistance, the report said.

So far, more than 400,000 offers have been extended to 2.7 million borrowers who are more than two months behind on their payments. More than 235,000 of those borrowers have enrolled in three-month trials.

Yet, it’s important to remember that not every firm is lagging behind. The report indicates that JPMorgan Chase is leading the pack, modifying 20% of their eligible loans, with Citigroup close behind, modifying 15%.

The disconnect over the foreclosure-fighting strategies had led to a host of criticisms that seem to fall into two separate camps. Lenders and servicers say the influx of borrowers looking to modify or refinance has been overwhelming. They’ve cited faulty computer systems, complex paperwork, and long-awaited guidelines as obstacles that have only served to slow the process down. The White House on the other hand claims that lenders, time after time, aren’t doing enough. Despite the billions in Federal dollars they’ve received, Washington feels that major lending institutions aren’t toeing the line — they’re not doing all they can.

What About Borrowers?

We’ve heard from several frustrated borrowers who have been shut out of these programs for several different reasons. Many have been on the cusp of approval, yet were denied by one of the program’s many stipulations. One reader was told that since he wasn’t behind on his mortgage, he didn’t qualify. Another reader recently commented that he was nearly finished with the multi-step loan mod process when he was denied because he has “reasonable” equity in his home.

What’s the problem here — is it the strategy or the system? Who’s to blame — those who invented the strategy (Washington) or those who run the system (lenders and servicers)? This is getting confusing we know. But say these services are doing the best they can, as fast as they can, with the system they have, is publicly shaming them going to allow them to work more diligently, swiftly, or effectively?

Even Lance Armstrong can’t win a race on a bike with a flat tire.

9 Responses to “Update1 When All Else Fails, Try Shaming Servicers into Cooperating”

  1. Treasury Issues Mortgage Loan Report Card | Truth in Foreclosure Says: August 5th, 2009 at 7:12 am

    […] When All Else Fails, Try Shaming Servicers into Cooperating (hsh.com) […]

  2. Ricardo Says: August 5th, 2009 at 11:43 am

    The problem is that the servicers have no shame!!!!With the “supposed” housing market having “bottomed” out, servicers are holding to mortgages and being extremely selective. They are in control.

  3. Tim Manni Says: August 5th, 2009 at 12:15 pm

    Hey Ricardo, Thanks for commenting. I do agree that in most cases services are in control, but so are lenders. However, I do disagree in saying that all have “no shame.” For investors, sometimes they believe that foreclosure is their best financial option. While it offers no way out for borrowers, investors have only one thing in mind, at that’s their investment. Thanks for commenting, hope to hear from you again. -Tim

  4. Cathey Hargrove Says: August 6th, 2009 at 3:07 pm

    I had some questions about the following examples given in your article: ‘One reader was told that since he wasn’t behind on his mortgage, he didn’t qualify. Another reader recently commented that he was nearly finished with the multi-step loan mod process when he was denied because he has “reasonable” equity in his home.’ 1. I didn’t think you had to be delinquent to participate in the HAM modification or any other aspect of the MHA programs. 2. I also thought the banks did an estimate of your property value when they opened up a case for you. I had a notation in my Citimortgage file that an estimate of property value was ordered on May 7th.

  5. Tim Manni Says: August 6th, 2009 at 3:37 pm

    Hey Cathey, Those two examples that you noted from our story were derived from reader comments. Often times, as is especially with the case of these programs, what one is told by their servicer, is different from what another reader is told by their servicer. 1. Technically, MakingHomeAffordable.gov says you don’t have to be behind in order to modify. However, the site also states that if you’re late on your payments you generally don’t qualify for the refi portion and should try modifying. 2. This is according to Making HomeAffordable.gov: If you report a hardship, one of the several things your servicer will do to determine if you qualify is “Apply a value test to determine whether the value of the loan to the investor will be greater if the loan is modified (factoring in the government’s incentive payments). For example, loans held by borrowers who have a lot of equity or whose incomes are very low in relation to the value of their homes probably will not pass this value test. If the modified loan is not of greater value, the investor and servicer may still modify the loan. However, modification in such cases is not required. I hope that helps answer your questions. Thanks, Tim

  6. Cathey Hargrove Says: August 6th, 2009 at 4:21 pm

    I guess I would read the following to mean that you could modify whether delinquent or not, but that you certainly did not have to be delinquent….. 1. Technically, MakingHomeAffordable.gov says you don’t have to be behind in order to modify. However, the site also states that if you’re late on your payments you generally don’t qualify for the refi portion and should try modifying. So, I’m a little confused when you say one servicer may say something different from another. Does that mean they are free to interpret the MHA guidelines in different ways?

  7. Tim Manni Says: August 6th, 2009 at 4:30 pm

    Cathey, I said that based on the feedback we’ve been getting from readers since I haven’t had any personal contact with servicers since I haven’t tried to refi or mod. It’s not that Federal officials are looking over the shoulders of servicers, but are we assuming that servicers completely understand these programs? It’s not that they are free to interpret as they please, but these programs are a lot to wrap your head around, and quite frankly there are a lot of them. Borrowers can be at the mercy of their servicer. It’s best to do your research on the program before you meet with your servicer so you’ll know full well what you are entitled to. I suggest logging onto makinghomeaffordable.gov and reading the FAQs associated with the refi and mod programs.

  8. Nate Graves Says: August 10th, 2009 at 9:13 am

    Can someone help me out here? I have a mortgage with countrywide/Bank of America. They keep telling me that The second phase of the whole program is not ready and keeps getting pushed back. The second phase as they call it is the loan modification part of the program. Bank of America keeps telling me that its being pushed back because the mortgage insurance companies are fighting it. I am assuming the ones who supply the PMI insurance are the ones. what I dont see is why? They still get paid the same.

  9. Tim Manni Says: August 10th, 2009 at 11:34 am

    Nate, Thanks for commenting. I’m not sure, let me look into this and see if I can find out anything else about the MI. We have had questions before about MI and the loan mod program. Thanks, Tim

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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