Loan mods still aren’t doing the job
by Paul Havemann
The Obama administration is growing impatient with the slow pace of loan modifications and wants to know why:
An Obama administration effort to reduce home foreclosures by lowering the mortgage payments of struggling borrowers before they fall behind is failing to help as many people as expected.
Among the problems: Some homeowners are being told they must be behind on their payments to receive help, which runs counter to the aim of the program. In other cases, delays are so long that borrowers who are current on their payments when they ask for a loan modification are delinquent by the time they receive one. There is also confusion about who qualifies.
We’ve written before about the problems with the myriad loan-mod programs (see here, here, and here, for example). This time around, executives of 25 mortgage-servicing companies are in Washington to give their side of the issue. One of the holdups is the fact that, although the programs were announced back in February, it took the government until late June to provide needed guidelines to servicers:
One issue was that mortgage companies were waiting for final federal guidelines on key issues such as how to determine whether a loan modification is preferable to a foreclosure, said Mary Coffin, head of loan servicing for Wells Fargo Home Mortgage.
The WSJ piece also quotes some anecdotes which suggest that borrowers have been getting mixed (or bad) advice, such as “stop making loan payments and seek a modification later.” Unfortunately, some of the programs are not helpful until and unless a borrower was delinquent:
Employees at mortgage-servicing companies often tell borrowers they can’t be helped if they are current on their loans, said Michael van Zalingen, director of homeownership services for the nonprofit Neighborhood Housing Services of Chicago.
While it sounds counter-intuitive, the programs are often confusing as to who, exactly, is eligible. More guidance from Washington could help get the ball rolling.
