Posted by Julie/MI on 5/23/10 8:51am
Msg #337799

Detroit Free Press article on modifications;lengthy but good

Funny is that the mortgage modification company said $2000 was not enough for all the hoops they have to go through! LOL

Posted: May 23, 2010
Long waits, denials plague efforts to modify mortgage
Program aimed at helping leaves some worse off in the end
BY GRETA GUEST
FREE PRESS BUSINESS WRITER

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Day one of two




The federal government's loan modification program, intended to help people save their homes by lowering payments, remains mired in long waits, denials of permanent modifications and shockingly large bills at the end of failed trial modifications.

One homeowner owed more than $21,000 after his lender denied him a permanent modification, even though his income was the same as when it approved a temporary modification.

"They string me along for nine months. These are nine months I'm getting further behind," said Patrick Dinunzio, 61, of Romeo.

In Michigan, 30,625 loan modifications were completed in April, down 9% from March. There are roughly 90,727 Michigan homeowners eligible for loan modification, according to Free Press calculations.

"Our focus now is on improving the homeowner experience and holding servicers accountable for their performance," Phyllis Caldwell, chief of the U.S. Treasury Department's Homeownership Preservation Office, said last week. By July, the eight largest loan servicers will need to report more information to the government, including homeowner experience.

"The story is always the same," said Adam Taub, a consumer attorney based in Southfield. "They are stringing people along by telling them not to make payments or having them make reduced payments and then denying the home loan mod. Then people are even closer to foreclosure."

Lenders, for their part, say they are trying to help distressed borrowers.

Is a deal with the bank the best way to go?
Past a pheasant ranch, assorted McMansions, crop fields and 2 miles of bumpy dirt roads, Dinunzio anxiously awaits the fate of his 1901 farmhouse in Romeo.

Dinunzio, 61, an artist and laid-off machinist, has lived with his wife, Ilene, in the 109-year-old white house on 24 acres for 17 years. Two refinances and a job loss pushed him toward a loan modification.

The temporary modification cut his $1,720 monthly payment to $697, based on his income. It lasted nine months, even though government guidelines call for a three-month trial period.

His lender, CitiMortgage, denied him a permanent modification this month. The bank told him his income was not sufficient -- but his unemployment benefits and his wife's Social Security checks are the same income Dinunzio said he had when the temporary modification was approved.

"That irritated me the most," he said. "They knew I was getting unemployment right from the start. Don't even start the process if you don't take unemployment."

Unfortunately for Dinunzio, the government changed the program during his trial period. It stopped allowing unemployment benefits to count as income because that income is temporary.

Dinunzio's experience is not unusual in metro Detroit. Some people are finding a temporary modification through the government's Home Affordable Modification Program hasn't solved their problem, only made it worse. They end up with a hit on their credit score and have to repay what was not paid during the temporary period. The problems persist despite months of criticism.

Meanwhile, banks say they are under-staffed and sometimes under-informed about new government programs designed to help borrowers.

Mark Rodgers, director of Citi public affairs, said he could not comment specifically on Dinunzio's mortgage, despite permission from Dinunzio.

"Citi works very hard to find solutions for customers," he said. "The biggest challenge to converting a permanent modification has been getting all of the required financial documentation, particularly establishing that the income provided verbally matches the documented income."

Under a permanent modification, loan payments are reduced for five years. After that, interest rates are supposed to rise by no more than 1% a year up to the current rate, which is less than 5%.

"The money that is owed on the loan does not change. It is an adjustment over this period of time so that you can get through this difficult time," said Alvina McHale, director of communications for the U.S. Treasury's Homeownership Preservation Office.

Trouble with denial
Dinunzio's denial letter also said he owes more than $21,000 in arrearages that must be repaid or foreclosure proceedings would begin.

Rodgers said that Citi has helped more than 900,000 distressed borrowers stay in their homes since 2007 through government programs and its own modification plans.

He said that the common reasons permanent loan modifications are denied include:

• A lender would receive more from a foreclosure than a loan modification. The government modification program allows lenders to compare whether more cash flow results from modifying the mortgage or leaving it as-is with the likelihood of foreclosure.

• All documents are not submitted by the borrower.

• All trial payments are not made.

• The borrower's financial or other relevant circumstances change during the trial.

• The current house payment is 31% or less of the borrower's gross income.

• The borrower lacks sufficient income to make modified payments.

Some lenders, including Citi, have started requiring borrowers to document their income instead of giving that information verbally. The government will require this in June to avoid having people denied permanent modifications after the trial period because their income isn't sufficient.

Rodgers said Citi follows Treasury guidelines in reporting to credit bureaus that borrowers are making payments under the government modification program. Partial payments are held until they add up to one regular mortgage payment.

Reporting this to credit bureaus hurts the credit scores of borrowers, however, even if they are never late on their mortgage payments. And that should change, Alys Cohen, a staff attorney for the National Consumer Law Center, said in April testimony before a U.S. House subcommittee.

Cohen also suggested servicers provide more detail when denying loan modifications and that an appeals process be established.

'False sense of hope'
Lisa Madden is the operations manager for Senior Financial Solutions in Livonia. Like many companies, Senior Financial got into the loan modification business for a time. But it soon became too much work for the $2,000 fee.

"It is an endless pit where you just try to call and call (the bank). ... If we are giving up, I have no idea what consumers are doing," she said.

Samara Burgos, 44, a Canton homeowner, also was given a temporary loan modification but denied a permanent one.

Bank of America has informed her that she owes $7,500 for being short on her payments during the eight-month trial period.

She said the modification was necessary because her husband, Jay, 47, was laid off from a supplier. Now he's working as a truck driver. The couple has three school-age children.

The family was in the middle of remodeling their kitchen and living room when the money ran out. Burgos prepares meals on plywood countertops.

"They said they couldn't help us," she said. "I don't think they should have the temporary loan modification. It gives people a false sense of hope."

A Bank of America spokeswoman said Thursday in an e-mail: "It appears that during the trial modification, a notice went out to them in error." She said the family is under review for a permanent modification.

While Bank of America has completed 56,000 permanent modifications under the government program, it has completed nearly 550,000 modifications through its own program, spokeswoman Jumana Bauwens said.

McHale of the Homeownership Preservation Office said her office is pushing servicers to make decisions more quickly on temporary modifications to avoid these issues.

Meanwhile, Dinunzio wonders whether he'll enjoy his retirement on the farm.

At a foreclosure prevention session this week, Dinunzio heard that some people were denied permanent modifications because they neglected to file one document. Once you are denied under the Home Affordable Modification Program, you cannot reapply.

"It's almost like a game," he said. "If you make one mistake, you lose."

Contact GRETA GUEST: 313-223-4192 or [e-mail address]

Reply by Linda_H/FL on 5/23/10 8:56am
Msg #337800

Next up - major spike in bankruptcy petitions...

to stave off the foreclosures AND simply because of peoples' inability to repay the arrearages...

Reply by MW/VA on 5/23/10 10:03am
Msg #337805

I hear those kind of stories, too--they are told they don't qualify for the Making Homes Affordable Program, and are put in mods at higher interest rates. Too bad, as I think they are only concerned with their profit margins again.

Reply by WDMD on 5/23/10 10:23am
Msg #337806

Are you saying the program the government came up with is not working as promised? There's a shocker.

Reply by 101livescan on 5/23/10 3:20pm
Msg #337820

I posted a home in Santa Barbara on Friday with $863K defaulted first mortgage for Trustee Sale on June 15. The homeowners were just getting ready to take off for a long weekend getaway. Mr. was extremely agitated, said they had a modification in process that was close to being consummated. I said my instructions were to post the property, and he could take the notice down after I had my photos, he was incensed. When I told a friend of mine later about this, he said a lot of people don't qualify for modification because of the type of loan the HO has, namely the pick a payment variety where all the deferred interest tacks on at the back of the loan, and it is interest on interest, before you know it the amount is staggering, and the banks will just as soon foreclosure as to workout with the homeowner. They can get the house back and get the market retail value of the house and be done with it, instead of waiting five years for the workout period. The loan will gradually and ultimately be more than the market value because of this neg am feature, and the interest rate climbing every year.

The next wave of foreclusures will be the mods that people ultimately cannot afford because the loan amount doesn't change, just the interest rate, over five years and it gets right back to where it was when it was modified.

Banks are only helping homeowners because Obama said they have to, but there is no incentive for banks to do this, and the government's plan is weak. A frail attempt to really help people. I also see that more minorities' loans are being modified than other borrowers. Probably because more minorities were taken advantage of. Most of the loans being modified are the old countrywide, very few other lenders are aggressively modifying loans.

Reply by LKT/CA on 5/23/10 4:40pm
Msg #337822

<<<When I told a friend of mine later about this, he said a lot of people don't qualify for modification because of the type of loan the HO has, namely the pick a payment variety where all the deferred interest tacks on at the back of the loan, and it is interest on interest, before you know it the amount is staggering, and the banks will just as soon foreclosure as to workout with the homeowner.>>>

I believe the AG sued Countrywide and anyone with a negative amortization (aka pick-a-pay) loan from Countrywide - now BAC Home Loans, it is required by B of A to modify *those* loans. However, the mod is useless if the HO has no income....I think that's the biggest roadblock to loan mods - job loss and thus no income by HO.

The negative amortization loans, in and of themselves, are not bad loans if they are understood. A HO should be qualified at the fully amortized payment (30 yr), not the minimum payment. The loan is not negatively amortized when the HO is paying any of the three payments above the minimum pymt (i.e. interest only, 30 yr, or 15 yr). It is only negatively amortized when paying the minimum pymt.

The whole point of a pick-a-pay loan is to pay the fully amortized pymt (i.e. the 30 yr or 15 yr pymt) and if an emergency happens (need new refrigerator, washer/dryer dies, need two new tires on car, etc.) and you need extra cash, drop down and pay the minimum pymt that month, take care of the emergency and resume paying the fully amortized pymt. This is something you cannot do with a fixed rate loan. These loans are great for small business owners. Receivables on the low end? Pay interest only or minimum pymt for some extra cash flow. Receivables good again? Pay the fully amortized pymt.

What happened was borrowers were qualified at the start rate (minimum pymt) and paying only that. Then when the start rate changed after 3 mos, 6 mos, 9 mos. etc. and the payment adjusted, then that minimum pymt of $1,400 pymt became a fully amortized pymt of $3,300 - based on the loan amt - and the borrower couldn't afford that. They were never qualified at that fully amortized pymt and should have been. Greedy banks just got the borrower in the home at whatever it took and this is the mess the nation is in.

Again, pick-a-pay loans in and of themselves are not bad.....they are misunderstood. However, I must say that just as there are bad fixed rate loans, there are bad pick-a-pay loans.

Reply by Shoshana/AZ on 5/23/10 7:54pm
Msg #337831

Pick A Pay Loans

Lenders I have worked for always qualified the borrowers by the fully indexed rate, not by the start rate. Interest rate could adjust monthly. The payment adjusted annually by a max of 7 1/2%.. The major problem was that often borrowers were qualified by stated income. Thus income was not verified.

Reply by Shoshana/AZ on 5/23/10 8:14pm
Msg #337835

Pick A Payment loans are actually more likely to be modified as they are considered toxic loans. The bank has been working on my Pick A Pay since Jan 2009. The main thing with a modification is whether or not the borrower can afford the modified payments.