Update3: Loan Mods: Submit ALL Your Paperwork!
by Tim Manni
Update3: If you’ve been ushered into a long-term trial mod, one non-profit wants to hear your story. Click here to find out more.
Original Post (published 12/10/09): We’ve covered the Treasury’s Making Home Affordable Program (MHA) quite a lot since it’s inception and have been quick to point out the program’s flaws as well as the flaws others have noticed. The White House has focused less on addressing the structural flaws of this program — which we feel have created a host of “unintended consequences” — and more on prodding lenders and servicers to step up their game.
While we’ve already addressed why we think “shaming lenders” isn’t the proper approach to increase the number of permanent modifications, it’s important to remember that MHA is a two-pronged attack.
When the president announced the Making Home Affordable plan in February, he specifically stated that the program will require “both buyers and lenders to step up and do their part.” However, some 10 months later, we know each party isn’t doing all they can. The Administration has made it clear that they feel that lenders and servicers haven’t lived up to their end of the bargain, but what about borrowers? According to several sources, a significant majority of borrowers haven’t received a permanent modification because their paperwork has been either incomplete or completely non-existent.
From WhiteHouse.gov (emphasis added):
The majority of homeowners in trial plans still owe their servicer paperwork. Thirty-seven percent of homeowners have submitted paperwork that is incomplete. More than twenty percent of homeowners have submitted no paperwork at all. As part of this campaign, Treasury and HUD will be engaging the 2700 HUD-approved housing counseling organizations to reach out to these borrowers.
The mortgage companies, also known as loan servicers, have had a hard time getting borrowers to complete the needed paperwork for the administration’s loan modification program. Nearly 60 percent of the 375,000 borrowers who qualify to have their loan modifications completed by year-end have either submitted incomplete paperwork or none at all.
“Borrowers must understand the urgency of getting their completed paperwork in so they do not miss out on the opportunity for more affordable mortgage payments,” said Phyllis Caldwell, who recently was named to lead the Treasury Department’s homeownership preservation office.
-be sure to see our link in the Wall Street Journal-
The White House hasn’t stopped short at using any means necessary to prod servicers along, including threats of penalties. Perhaps they might consider a better way to prod borrowers, too, given that the risk of losing their home to foreclosure seems insufficient to get the job done. Or, will the administration push to get these “no-doc trial mods” to a permanent status?
Update1 (published 12/09/09): Just this afternoon, Chase — the nation’s third-largest servicer — announced that “only 16% [of their modifications] have been approved (or ready to be approved) for a permanent modification.”
From National Mortgage News:
Approximately 71% of the homeowners are current on their trial mods, but many have not submitted the required documents for underwriting – pay stubs, proof of employment and tax returns. “We are focused on helping the 51% of borrowers that are paying but need help completing documents,” said Chase executive Molly Sheehan.
The inability doesn’t end with Chase. Only about 10,000 borrowers nationwide completed the modification process as of October, according to the Associated Press. The news source says the Treasury will release November’s stats tomorrow. With perpetual, back-and-forth blame being passed between servicers and borrowers, we wonder how long the administration will let their program continue as is without making some changes.
Update2: As promised, the November numbers are in. As of November, 31,382 loan mods have been made permanent out of 759,058. While November’s number is still drastically low, it’s about three times higher than October’s (based on the Associated Press).
