Loan-modification hassles frustrate Oregon homeowners

Homeowners in distress are losing time, money and peace of mind as they get trapped in a bureaucratic nightmare

Requests to modify home loans and reduce mortgage payments, relatively uncommon a few years ago, have surged as borrowers struggle to avoid foreclosure. Many people requesting changes in their home loans say they’re getting the runaround from loan servicers — often national banks, who make the day-to-day decisions about modifying loans.

“Most housing counselors and advocates for borrowers will tell you they are submitting documents three, four, five, six, seven, eight, nine, ten times, and they’re getting lost,” said Diane Thompson, an attorney with the National Consumer Law Center, a national consumer group.

The slipshod handling of loan modification requests by loan servicers is “endemic across the country,” Thompson said.

An adjustable rate mortgage combined with a layoff has put Joanne Smith at risk of losing her home in West Salem. It took nearly a month and a half of repeated phone calls, and long waits on hold, to get a person on the phone to discuss a loan modification, she said.

Smith asserts that the delays seem like a tactic to discourage borrowers and expedite foreclosures.

“They are just ready to pounce,” Smith said. Unless a deal can be worked out, her home could got into a foreclosure sale within weeks.

Friction between borrowers and loan servicers has increased as foreclosure fillings reach astonishing levels. RealtyTrac, a property and foreclosure listing firm, says that 2009 foreclosure filings in the United States rocketed past 2.8 million.

At the same time, the Obama administration $75 billion “Making Home Affordable” loan modification program, known as HAMP, is supposed to spur loan modifications and prevent foreclosures. In November, a government report recapping the program’s progress reported that only 31,382 HAMP loans had been made permanent.

Statistics aren’t complete, but complaints about trouble in modifications are growing:

-Oregon’s Department of Consumer and Business Service keeps a tally on loan modification complaints reported by borrowers. DCBS does not have authority to regulate national banks and forwards those complaints to the Office of the Comptroller of the Currency, a federal agency. In 2007, DCBS took just nine complaints related to loan modifications. By 2009, the number of complaints rose to 66.

-Likewise, the Oregon Attorney General Office records complaints about banks when someone files a report and passes them on to a federal agency. The state attorney general also is constrained from taking action against a federally-chartered bank. In 2009, however, the attorney general took 108 complaints related to real estate credit and foreclosure. Countrywide Home Loans Inc., with 37 complaints, was the entity with the highest number of complaints (Countrywide has been absorbed by Bank of America). Few complaints were apparently taken prior to last year, although a state spokeswoman advises that a new method for coding these types of complaints was implemented in 2008.

Hurry up and wait

In the best case, applying for a loan modification is a complicated process. Loan servicers can’t help everyone in financial straits, and borrowers need to follow through by submitting detailed information.

“It’s a process of hurry-up and get the paperwork in — and then wait,” said Kim Beesley, a community outreach director for Consumer Credit Counseling Service of the Mid-Willamette Valley Inc. The nonprofit provides free counseling to home owners seeking loan modifications.

Loan servicers are overwhelmed with requests for loan modifications and the process can be daunting for borrowers, Beesley said, but she hasn’t seen examples of banks acting in bad faith or treating customers unfairly.

Tom Goyda, a spokesman for Wells Fargo, said the bank has doubled the size of staff devoted to home retention. The company has about 15,000 employees who work with homeowners seeking to modify home loans, he said.

“There were circumstances, certainly, where we didn’t reach the customer service levels that we would want to have in place,” Goyda said. Well Fargo has resolved many of the issue raised by the sudden increase in customers wanting loan modifications, he said.

The last resort?

Banks say foreclosure is the last resort. Investors in mortgages stand to lose much more money on a foreclosure than on a loan modification.

Others say the relationship between loan servicers, investors and homeowners is more complicated.

Critics maintain that loan servicers, who administer loans on a day-to-day basis, may or may not lose money when the investor loses money.

In written testimony submitted to a U.S. Senate subcommittee, an attorney with the National Consumer Law Center stated that servicers have cut costs “by relying more on voicemail systems and less on people to assist homeowners, by refusing to respond to homeowners’ inquiries, and by failing to resolve borrower disputes.”

The Oregon State Public Interest Research Group, another consumer advocacy group, asked its members to submit stories about their experiences when attempting to modify loans and has so far received about 20 responses.

All of the respondents have similar complaints, said Jon Bartholomew, an OSPIRG policy advocate. The typical story: borrowers will send in their paperwork as directed by the bank, but the bank says it never arrived.

From homeowner to renter

Karyn Williamson made a failed attempt to keep her family’s home in southeast Salem. When her husband’s employer warned that layoffs were imminent, Williamson went to Bank of America and asked for a loan modification.

Bank of America initially turned her down. The bank later seemed to reconsider, said Williamson, who had a steady job and thought her income was sufficient to make mortgage payments.

In May, Williamson sent the paperwork to the bank and waited. She was told to expect a response by June. A bank representative admonished her not to call and check on the progress. June came and went with no e-mails, phone calls or letters from the bank, she said.

Nothing apparently was done with her request until September, Williamson said. By then, she had given up on keeping the home.

“It was a quirky, old beautiful building that I put my soul into. I loved that home, ” she said.

To lighten the family’s debts, Williamson decided to do a short-sale on the Salem property. Bank of America lost documents multiple times before the company approved the plan for the short-sale, she said.

“Working with them is like pounding my head against a concrete wall,” Williamson said.

Delays by Bank of America have also hindered Williamson’s attempt to sell the property and get free of the debt. The bank’s slow response to offers on the property has resulted in two lost sales, said real estate agent Kathleen Dewoina, who represents Williamson.

In the meantime, the vacant house in Salem suffered a catastrophe when waterpipes burst during this winter’s cold snap. Williamson had winterized the home and it’s unknown who turned the water back on, Dewoina said.

The water damage, which Dewoina described as serious, hasn’t been repaired.

Bank of America’s media representative did not return a call seeking a comment on its procedures.

Williamson’s husband has found a new job at a trucking company in Southern Oregon, but now she is unemployed. They live in a rented double-wide trailer in Gold Hill.

Source statesmanjournal.com