The Wall Street Journal on Loan Modification Aid – Worse Off?

May 18, 2010: The Wall Street Journal published the article.

The title: “Loan Aid Leaves Some Worse Off”

The subtitle: One in Four in Government’s Mortgage Program Is Dropped; Tales of Exhausted Savings

The article was lengthy and primarily about a woman in Phoenix, yet my picture loomed large on page three of the print edition. I kept reading the article to see when my situation would be addressed, only to find myself relegated to the last three paragraphs. The picture was larger than the area allocated to text. I turned the page in hopes of seeing more and was met with an almost full-page advertisement from Chase touting the ways Chase was helping struggling homeowners. Had the editors of the Wall Street Journal caved in the face of the almighty dollar? I hoped not, but how could one really know?

The article read as follows:

The government’s mortgage-modification program has left some struggling homeowners worse off than they were before.

The Treasury reported Monday that nearly one in four homeowners who were offered lower payments under the Obama administration’s 15-month-old effort have been weeded out of the program. Many people were removed from the trials because they failed to make payments, didn’t provide all the financial documents needed to qualify or were found to be ineligible.

Homeowners are first offered trial modifications under the program, which provides incentive payments to loan servicers, investors and the homeowners. If borrowers make the payments and satisfy other criteria, those trials are made permanent, ensuring a cut in payments for five years.

While awaiting answers, some borrowers keep making payments, exhausting their savings in what may be a futile effort to save their homes. They also incur fees from the banks and delay taking action that might give them a fresh start in a more affordable home.

Some borrowers had unrealistic expectations about loan-relief programs, which were never designed to prevent all foreclosures. Another big problem is that banks often take six to 12 months to determine whether applicants are eligible.

“I had to learn the hard way and deplete my savings doing it,” said Mia Parry, a manager at a mortgage brokerage in Scottsdale, Ariz., who has spent nearly two years seeking a loan modification. She now wishes she had put her home on the market.

Most struggling borrowers do benefit from seeking help, said Aaron Horvath, a senior vice president at Springboard Inc., a nonprofit counseling service based in Riverside, Calif.

Some win modifications, cutting monthly payments by hundreds of dollars. Others who ultimately can’t get modifications at least are allowed to stay in their homes for months, making either no payments or reduced payments.

But “if you’re draining your savings” in a vain effort to hang onto a home, he said, you may end up worse off.

Eager for quick results, the Obama administration last year prodded banks to start people on trials without first obtaining documents proving they were eligible. That has led to many crushed hopes. The Treasury earlier this year changed its rules and told banks to start trials only after getting documents that proved borrowers qualified.

The Treasury said in a monthly report on the government’s $50 billion Home Affordable Modification Program, or HAMP, that about 1.2 million trial modifications had been started under the plan, and about 281,000 borrowers had washed out by the end of April.

Only about 30% of borrowers who seek help from the main foreclosure-prevention counseling program at Neighborhood Housing Services of South Florida end up with modifications, said LeeAnn Robinson, chief operating officer of the Miami-based nonprofit. Many borrowers don’t have enough income to support even reduced loan payments; others give up before completing the paperwork.

On average, it takes seven months to resolve a borrower’s situation, up from four months a year ago, Ms. Robinson said. Banks and other loan servicers can’t keep up with the demand for help, she said.

Ms. Parry bought a home in Phoenix in 2005 for $535,000, but she believes it now would sell for around $250,000. She has been seeking a modification from a unit of Citigroup Inc., the servicer of her two mortgage loans, since June 2008.

Ms. Parry’s application was turned down in late 2008, but President Obama’s announcement of HAMP in February 2009 rekindled her hopes. Ms. Parry decided to keep making payments on her loans because she expected to qualify for this new program.

Citigroup started her on a HAMP trial in June 2009, and she made three payments. Then Citigroup told her there had been a mistake and she would need to go through another three-month trial.

At the end of that second trial, Ms. Parry said, Citigroup told her the investor that owned her first mortgage wasn’t participating in HAMP, so she couldn’t get a modification under that plan. During her trial period, Citigroup charged her more than $1,300 of “late charges” and “delinquency expenses,” she said.

Ms. Parry said Citigroup should have been able to determine that the investor wasn’t participating before she went through the trial. Citigroup recently offered her another type of modification that she said fell short of the HAMP formula and wouldn’t lower her costs enough to make keeping the home worthwhile. Unless Citigroup improves the offer, she will try to sell the home.

A Citigroup spokesman said: “We have worked diligently with the borrower and the investor in an effort to find a solution that meets both the borrower’s needs and the investor’s requirements.”

The Treasury said in a monthly report on the government’s $50 billion Home Affordable Modification Program, or HAMP, that about 1.2 million trial modifications had been started under the plan, and about 281,000 borrowers had washed out by the end of April.

Only about 30% of borrowers who seek help from the main foreclosure-prevention counseling program at Neighborhood Housing Services of South Florida end up with modifications, said LeeAnn Robinson, chief operating officer of the Miami-based nonprofit. Many borrowers don’t have enough income to support even reduced loan payments; others give up before completing the paperwork.

On average, it takes seven months to resolve a borrower’s situation, up from four months a year ago, Ms. Robinson said. Banks and other loan servicers can’t keep up with the demand for help, she said.

Ms. Parry bought a home in Phoenix in 2005 for $535,000, but she believes it now would sell for around $250,000. She has been seeking a modification from a unit of Citigroup Inc., the servicer of her two mortgage loans, since June 2008.

Ms. Parry’s application was turned down in late 2008, but President Obama’s announcement of HAMP in February 2009 rekindled her hopes. Ms. Parry decided to keep making payments on her loans because she expected to qualify for this new program.

Citigroup started her on a HAMP trial in June 2009, and she made three payments. Then Citigroup told her there had been a mistake and she would need to go through another three-month trial.

At the end of that second trial, Ms. Parry said, Citigroup told her the investor that owned her first mortgage wasn’t participating in HAMP, so she couldn’t get a modification under that plan. During her trial period, Citigroup charged her more than $1,300 of “late charges” and “delinquency expenses,” she said.

Ms. Parry said Citigroup should have been able to determine that the investor wasn’t participating before she went through the trial. Citigroup recently offered her another type of modification that she said fell short of the HAMP formula and wouldn’t lower her costs enough to make keeping the home worthwhile. Unless Citigroup improves the offer, she will try to sell the home.

A Citigroup spokesman said: “We have worked diligently with the borrower and the investor in an effort to find a solution that meets both the borrower’s needs and the investor’s requirements.”

Martha Wright stands on her back deck Thursday, May 13, 2010 in Avalon, New Jersey.(Stephen Chernin for The Wall Street Journal)

Martha Wright stands on her back deck Thursday, May 13, 2010 in Avalon, New Jersey.(Stephen Chernin for The Wall Street Journal)

Martha Wright, a marketing executive whose income has dropped in recent years, has been trying since February 2009 to work out a deal with J.P. Morgan Chase & Co., the bank that services the $1.1 million mortgage on her Avalon, N.J. home.

The bank denied her request last summer, but Ms. Wright said she kept trying because the responses from the bank were unclear and inconsistent, and she believed she still might qualify. Meanwhile, she said, by continuing to make payments, she cut her nonretirement savings to about $500 from $63,000 in early 2009.

A spokesman for J.P. Morgan said the bank told Ms. Wright on three occasions that she didn’t qualify for a modification. “Modifying the loan would produce less value to the loan’s owner than foreclosing,” he said.

Springboard credit.org Nonprofit Consumer Credit Management

The Wall Street Journal reporter was working on many facets of the “worse off” story, including speaking with a representative of the Springboard credit.org Nonprofit Consumer Credit Management organization for a perspective on the situation. They offered to help me try to work something out with Chase and I jumped at the chance. I was devastated by the “negative net present value” comment Chase provided and while I’d received nothing in writing about it, the state of affairs seemed dire. Why hadn’t Chase communicated they would prefer to foreclose rather than modify my loan from the get-go? Why string me along for over thirteen months? It simply made no sense. How could anyone make an informed decision without timely and clear answers?

I would take help from anyone with something to offer, and while I’d been working with a credit counselor at CCCSDV.org, perhaps the folks at Springboard www.credit.org could help. It was free, they were offering to help; Springboard had professionals who specialized in home loan modifications and I needed all the help I could get – I went for it.

WaMu Chase Contact Information

Washington Mutual home loan customers are “serviced” by Chase. In late September 2008, the FDIC sold Washington Mutual’s assets, secured debt obligations and deposits to JPMorgan Chase & Co. Home loans which originated with Washington Mutual and are in default end up with Chase Home Finance in California; it is possible (unverified) that all Washington Mutual originated loans are handled in California by Chase Home Finance. Following is a list of key Washington Mutual Chase contacts with phone numbers and/or web addresses when available:

Chase Home Finance (generic): (800) 848-9380 [This number handles home loans (in default) originated by Washington Mutual]

Chase Home Finance (Direct fax): (904) 462-1926

Chase Loss Mitigation: (866) 316-9218

Chase Loss Mitigation Alternate Numbers: (866) 349-3540; (800) 446-8939

Chase Customer Service (generic): (866) 550-5705

Chase general fax (generic): (866) 282-5682

You cannot do it alone. Get a HUD-approved counselor to negotiate on your behalf. They are FREE. Go to Springboard (800) 431-8456 for Nonprofit Consumer Credit Management or visit: www.credit.org

Click on http://www.credit.org/housing/loan-modification-program and get started. Chase says they want to help but they are giving lip service only to the American people. Your tax dollars have paid for HUD-approved counseling, use it!

Why use a counselor? Because when you fill out the forms, Chase is running your numbers up against a “black box” formula only they know. Your counselor can at least tell you when your numbers are way out of line and exceed national averages. You need to use every tool in your arsenal to fight the Chase machine and get a loan modification.

You will need to submit a third-party authorization form to allow a counselor to speak on your behalf with Chase. Request the form from both Chase and see if your own HUD-approved counselor has a form. Submit both immediately so Chase can’t stall.

HAMP & $729,750…this is the dollar cap on loan balances which can be modified by HAMP, but the number is misleading. A dollar cap is assigned to each county in the nation. For example, in Cape May County, NJ, the HAMP cap is $487,500. Because my loan balance is greater than $487,500, (and also happens to be greater than $729, 750) I do not qualify for a HAMP modification. I qualify only for a CHAMP (Chase in-house program) modification. Save time and aggravation and learn your county HAMP cap to determine if you even qualify for a HAMP modification!

Chase Homeowner’s Information Packet: https://www.chase.com/ccpmweb/chf/document/Borrowers_Assistance_Form_Chase_Fill_2009.pdf  

Chase Home Ownership Centers (allegedly they will help you submit & follow-up on modification paperwork): https://www.chase.com/chf/mortgage/hrm_centers

Chase Home Finance only calls when they want to

May 10, 2010, 2:00 pm: Natalia Carrillo at Chase (800) 848-9380 ext. 382-3158 had not returned my call; it had been over 48 hours if we were counting business days only, although Natalia had called me once on a Sunday (April 25, 2010 at 3:55 pm), so it had really been over 72 hours without a call back, or any contact from Chase. It had also been eleven days since my financial interview with Chase – so what exactly were these new processes? They seemed like the same old Chase processes: ignore, obfuscate and deny.

Chase home loan modification new processes mean…

May 6, 2010, 1:49 pm: Called Natalia Carrillo at Chase (800) 848-9380 ext. 382-3158. It had been a week since my financial interview with Loss Mitigation Solicitor Bailey; Natalia had referenced “new processes” so I was eager to learn more. My call was taken by Customer Care Professional Jack who confirmed my contact information and reinforced the fact that Chase was attempting to collect a debt. I asked to speak with Natalia Carrillo and Jack transferred me but the outbound message was clipped. I missed the beginning and while it did not replay, I’d heard the part that said to “leave a message, press 1; otherwise, stay on the line”. I stayed on the line only to reach Brandon. I said I wanted to leave a message or speak with Natalia Carrillo and Brandon said he would transfer the call. I heard the same clipped outbound message so I pressed 1 to leave a voice mail for Natalia Carrillo. Her outbound message said to expect a call back in 24-48 hours. I certainly hoped a timely call back was part of the new processes at Chase since my track record on callbacks was holding steady at slim and none.