Alison Myers of Evergreen raced to get a loan modification under the Home Affordable Modification Program as soon as she could back in March.
Nine months and a lot of aggravation later, she claims she still doesn’t have any relief and is getting frustrated and fed up.
“I have been misinformed, shuffled back and forth, and told repeatedly to resubmit paperwork,” Myers said. “The hardest thing about this is feeling so cut off with nowhere to go.”
JPMorgan Chase, which services her mortgage, said its records show Myers was sent a modification package in April, but that she rejected it, only to resubmit it in late summer.
“We connected with Alison Myers and sent her a trial modification via overnight mail in the spring,” said Chase spokesman Tom Kelly.
Myers was given a modification that cut her payments by about $150 a month, he said. But Chase records show she has continued to overpay, based on her original mortgage amount.
A Chase worker told her to tear up the initial modification offer after she was concerned about a provision in it, Myers said.
But then another worker told her to try again when she called back in the summer.
To her knowledge, she never received a trial modification offer.
“We do see inconsistencies with how the program has been implemented by servicers. There are a lot of communication barriers,” said John Snyder, manager of foreclosure programs with NeighborWorks America, a Washington, D.C., group that represents housing counseling agencies across the country.
The Obama administration rolled out the modification program, known as HAMP, in an effort to modify mortgage payments more closely to what struggling borrowers could actually afford. The program offers interest-rate reductions, longer loan terms and, in some rare cases, principal reduction.
Borrowers are given a three-month trial period to show they can handle the lower payments, which are typically set at 31 percent of gross income. If they can do that, and after submitting the required paperwork, they are given a permanent modification.
Jobless growth taking toll
Mortgage servicers were initially slow in gearing up, but as of Oct. 31, 650,994 borrowers nationwide were in a trial modification, including 9,657 in Colorado, according to Treasury Department counts.
So far, around 5 percent of borrowers on a trial period have moved into permanent modification, but that ratio is expected to increase over time.
HAMP’s eventual goal is to help 3 million to 4 million borrowers stay in their homes.
But already, the program is outdated, given that unemployment and loss of income, rather than how the loans are structured, are now behind a majority of delinquencies, according to a report last month from the Congressional Oversight Panel.
“HAMP was not designed to address foreclosures caused by unemployment, which now appears to be a central cause of nonpayment, further limiting the scope of the program,” the report said.
The program’s way of dealing with consumers and handling paperwork is definitely outdated and a source of frustration, housing counselors and consumer advocates say.
Loss-mitigation programs rely heavily on fax machines and call centers, increasing the chances for lost documents, lengthy delays and misunderstandings.
“Fax is a very antiquated means of communication, but all loss mitigation has been relying on it,” Snyder said.
Face-to-face meetings with borrowers would help make the loan modification process smoother, said Pat Garofalo, an economics researcher with the Center for American Progress Action Fund.
Also, using more modern means of handling requests, such as submitting scanned documents online via e-mail, would be a leap forward.
Garofalo said a major weakness of HAMP is that it doesn’t hold servicers to firm deadlines or provide for stiff penalties if they fail to comply.
“There is no disincentive for backing things up,” he said, adding that the U.S. Senate greatly weakened HAMP when it defeated a provision that would allow bankruptcy judges to rework mortgage terms.
For example, servicers aren’t supposed to foreclose on borrowers seeking a HAMP modification until they have either given them a trial modification or rejected their request.
An unhappy birthday
Angela Austin thought she was about to receive a HAMP modification through Bayview Loan Servicing. But the firm pushed forward with a foreclosure sale of the Westminster home she shares with her mother and son.
She remembers the day clearly — Oct. 14 — her birthday.
After applying for a modification in March, Austin worked with one specialist who repeatedly assured her one was on its way, she said.
Despite that, Austin resubmitted her information via fax repeatedly after long delays made it stale. She said she has written six different hardship letters explaining why she needed the modification.
Panicked about losing her home, Austin, who is the author of the book “The Day My Soul Was Shattered,” said she turned to the Colorado attorney general’s office.
Bayview did not respond to an interview request before deadline, but Austin said the servicer has rescinded the foreclosure sale and offered her reduced payments.
To be fair to servicers, they must answer to the investors who own the mortgage securities, and some servicers are fearful of overstepping their bounds and getting sued.
Government requirements for documentation are often more stringent than their own, adding to the time it takes to process a request.
And borrowers aren’t always living up to their end of the bargain. Chase, among the more active servicers participating in HAMP, claims that only about one out of four borrowers in a trial modification has submitted the necessary paperwork to make it permanent.
Aldo Svaldi: 303-954-1410 or asvaldi@denverpost.com
