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Homeowners Fight for Loan Modifications from Swamped Mortgage Servicers

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By Pamela Yip

mortgage_lead_8_191RISMEDIA, August 19, 2009-(MCT)-After losing his job in January, Stuart Miller has fought hard to keep his home out of foreclosure. At the end of May, the Plano, Texas, man began trying to get Wells Fargo & Co. to review his application for a loan modification. After making repeated calls, he finally was told that the company would place a three-month moratorium on his mortgage payments. ”They’re going to give me July, August and September, but I haven’t paid June yet,” said Miller, a former trainer for a franchise company. He’s among many struggling homeowners who say their attempts to get a loan modification have been met with either long waits to get their case reviewed, no response at all or a runaround.

The Obama administration is leaning on mortgage servicers- the companies that collect and process mortgage payments- to step up modifications. A report released last week by the Treasury Department showed wide variations in how quickly mortgage companies are helping troubled homeowners avoid foreclosures. It also found the government’s program is helping only a tiny fraction of struggling homeowners. As of July, only 9% of eligible borrowers had seen their mortgage payments reduced with modified loans, the report said.

“Much more progress is needed,” Treasury Secretary Timothy Geithner and Shaun Donovan, secretary for Housing and Urban Development, wrote in a letter to mortgage companies. “There appears to be substantial variation among servicers in performance and borrower experience, as well as inconsistent results in converting trial modification offers into actual trial modifications.”
Mortgage servicers said they’re committed to working out more loan modifications, but they’re overwhelmed by the number of homeowners all wanting help at the same time.

“It’s a new ballgame,” said John Dalton, president of the Financial Services Roundtable’s Housing Policy Council. “The delay is the fact that we’ve got 3 million people today who are 60 days past due on their loans. These servicers have not been accustomed to and were not geared up to deal with that many incoming calls with people having difficulty.” The industry also is reinventing itself to add loan modifications to its traditional role as the collector and processor of mortgage payments, he said. “Loan modifications are a relatively new thing,” Dalton said.

A loan modification is different from a traditional mortgage refinancing. When you refinance, you sign a new contract for a new loan. A loan modification involves changing the existing loan by lengthening its term or lowering the interest rate so that you can continue to afford your mortgage payment.

Homeowners may be eligible for a loan modification if they have a mortgage payment greater than 31% of their monthly gross income and can document that a financial hardship has made the payment unaffordable.

Miller, the Plano homeowner, hopes he will soon receive a confirmation letter from Wells Fargo with the details of his loan modification. He said the process he underwent to get to this point was frustrating. “My frustration is the time that it takes,” Miller said. “They have control of my financial life, and I can’t talk to a decision-maker. They literally get to say whether I get to live in my house or my life gets completely turned upside-down, and I am literally at their mercy.”

“While the majority of our customers who request help are getting through to us and receiving the help they need, we know we’ve fallen short of our customer service goals in some cases,” Mike Heid, co-president of Wells Fargo Home Mortgage, recently said. “We’ve recently undertaken new steps that will soon enable us to qualify most borrowers (for a modification).”

Bonnie Mathias of Dallas hopes for a similar outcome. She has applied for a loan modification with her servicer, CitiMortgage. “It’s been a nightmare,” said Mathias, a customer service representative at AT&T Advertising Solutions. Her husband’s company, which sold commercial exercise equipment, went out of business last September. He found another job, but his income is lower now.

Mathias applied for a loan modification in February. “I’m having a difficult time getting my counselor from CitiMortgage to contact me,” said Mathias, a chapter leader at ACORN, the community organization that has been putting pressure on mortgage companies to help struggling homeowners. “This is my second counselor, and I have yet to talk to either one of them.”

Despite the difficulty, Mathias doesn’t plan to give up and advises others to do the same. “Persistence absolutely is the key,” she said. “Do not give up.”

When you apply, have at the ready the necessary documents, such as tax returns, pay stubs and a letter describing why your mortgage is unaffordable, and what caused your income to fall or expenses to rise. Not having the necessary documents will gum up the process of getting a loan modification. And if anyone says you have to be behind on your mortgage payment to be eligible, don’t believe them.

Homeowners are eligible if they are “at risk of imminent default.” Unfortunately, many responsible homeowners have been thrown into financial chaos by the sour economy and are now at risk of default. They’re making desperate, good-faith attempts to save their homes. It behooves mortgage servicers to move much faster to help those people.

(c) 2009, The Dallas Morning News.
Distributed by McClatchy-Tribune Information Services.

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