Homeowners Say Banks Not Following Rules for Loan Modifications

[StarfarerBill]

By Paul Kiel, ProPublica

Nathan Reynolds is something of an expert on the government’s foreclosure prevention program. A mortgage broker who’s worked in the Chicago area since 1998, he’s seen both his business and his home’s value plummet in the past few years. After receiving his own trial loan modification from JPMorgan Chase, he’s helped others apply for modifications through the program on his own time.

But in November, after Reynolds had made trial loan payments for seven months, Chase told him his mortgage would not be permanently modified. Chase had determined that his personal financial troubles were only temporary — because Reynolds had expressed optimism that the administration’s policies might rescue the housing market, boosting his income.

That’s not a legitimate reason for a loan servicer to deny someone’s modification, according to the Treasury Department’s guidelines for the program. And Reynolds’ experience — along with the cases of two other homeowners examined by ProPublica, shows how servicers have created unnecessary hurdles that, in some instances, violate the loan program’s rules.

Housing advocates say they frequently see homeowners rejected or kept in a trial modification for questionable reasons. “There’s a real resistance on the servicers’ part to making permanent modifications,” said Diane Thompson of the National Consumer Law Center.

The administration set a goal of helping up to 4 million homeowners through the $75 billion mortgage modification program as a way to blunt the boom in foreclosures. Treasury has produced a growing number of mandatory guidelines for banks and other loan servicers to review applications and perform the modifications. In exchange for tailoring loan payments to 31 percent of the homeowner’s monthly income, both the servicer and the owner of the loan receive incentive payments.

Servicers representing 85 percent of the housing market have signed up to participate. Applicants must first go through a trial period before their mortgage payments can be permanently reduced. But servicers have been slow to convert hundreds of thousands of trials into permanent modifications — as of November, only about 31,000 had been made permanent. That spurred Treasury to publicly criticize the servicers’ performance and to put out new guidelines in recent months to speed up the process.

More:
http://www.propublica.org/ion/bailout/item/homeowners-say-banks-not-following-rules-for-loan-modifications

[notesdev]

1. Banks aren't going to make any loan mods permanent

that is, without a gun to their heads.

Why? Because doing so means they have to take the hit to their books, mark down the asset (the mortgage)... and they simply cannot afford to do it. ALL the big banks go belly up if they do that, they simply hold too much bad paper to live if the markdowns come to pass.

[midnight]

2. Obama needs to do debt forgiveness to keep people in their homes. Screw the banks.

[Taitertots]

3. Insane policy

Do you want to destroy the housing market over night?