By Mark Huffman
ConsumerAffairs.com
March 24, 2010
"We're here to help," proclaims a headline on Fannie Mae's Web site, offering details of the Obama Administration's Making Home Affordable Program, aimed at helping struggling homeowners modify their mortgages.
Some homeowners have obviously received help, but foreclosures continue and scores of frustrated consumers have written to ConsumerAffairs.com in recent months detailing the nightmare of trying to work with various loan servicers to modify their mortgage.
"Our nightmare began in March of 2009, " said Thomas, of Winthrop, Mass. "Enclosed with our Citimortgage statement was a flyer for a home modification. We qualified because I am collecting unemployment and my income was cut in half."
Up until this time Thomas and his wife Lynne had managed to pay their $2,534 mortgage every month, and on time. Thomas said he was enrolled in a trial modification and told to pay just $1,500 a month for three months. Worried about his credit rating, Thomas said he was assured his enrollment in HAMP would protect him. But it turns out there was no protection.
Denied
"One year later, according to Citimortgage we were denied the Home Modification Program through Fannie Mae because of my unemployment benefits and are now faced with a Citimortgage 'in-house' modification," Thomas said.
Thomas and Lynne did get their payment lowered by $300. But because they made much lower payments for a year - at the direction of the servicer - the interest and late fees have been added to the principal of the loan, raising it from $289,000 to $306,000.
"Also, we were reported to all major credit agencies stating we were in foreclosure," Thomas said.
Diane, of Port Jefferson Station, N.Y. was in a similar situation last year.
Never missed a payment
In August 2009 I decided to get proactive about my mortgage," Diane told ConsumerAffairs.com. "I had never missed any payments but thought that the new HAMP program would be helpful to me to avoid ever getting behind. So, I sent in the paperwork, was pre-qualified and told to make payments of $2151 rather than the $2650 that was my usual payment."
Within a month or two Diane says she started getting letters saying that she was behind in the amount of money she owned Citimortgage.
"I paid every single payment as agreed in the trial," she said. "So I called Citi, and it turns out that the Modifications Department and the Collections Department are not related."
Diane said she was told to disregard the collection letters and keep making the trial payments. She said she was told that if she paid for three months, she would be approved and everything would be taken care of.
$8000 in back payments
But everything wasn't taken care of. Diane's permanent modification was denied. Next she got a call from collections demanding $8000 in back payments.
Keep in mind that Diane and her husband were not behind on their payments before starting the trial modification and had a good credit rating.
"No one ever said that this was a possibility, ending up behind on our mortgage, despite making all the payments," Diane said. "Had I known that, I would have kept making full payments rather than the modification payment and just waited for the paperwork to go through for the permanent modification."
Neither Thomas nor Diane probably needed a mortgage modification, though it's not hard to understand how they might think they did. While a modification is intended to help a homeowner avoid foreclosure, many consumers got the idea that the government program was available to help them because, like many in this economy, they were struggling. In early 2009, there was a lot of fear.
"I was having a hard time paying bills, but I managed," Diane admits.
A better screening process might have reduced the number of trial modifications and saved homeowners like Diane and Thomas a lot of time, trouble and heartache.
Good candidate
Patti of Klamath Falls, Ore., is probably more like the homeowner the modification program was designed to help.
"In November 2009, due to my husband's periodic layoffs from his employment, we fell two months behind in our mortgage payment," Patti told ConsumerAffairs.com. "The GMAC customer representative that I spoke with asked if we would apply for a mortgage modification through the Obama Making Home Affordable Program. I confirmed that we would, and a packet of paperwork arrived approximately 15 days later."
Patti says she supplied all the requested paperwork and had the presence of mind to send it USPS Certified Mail, Return Receipt Requested. She knows that GMAC received the packet on December 28, 2009.
She was told she would learn in two to four weeks whether or not she was approved. Four weeks, six weeks and eight weeks went by, and she says she heard nothing about the modification. However, the collections department was very attentive.
"We have remained two months behind in our mortgage payment since we can make only one payment at a time," she said." The collection department calls twice a week, and collection letters continue even though we have explained our situation over and over again to each representative that calls."
Finally, on March 17, 2010 Patti heard about the modification request. No, it had not been acted on, she was told, because several months had passed since she sent in her paperwork, and it needed to be updated.
Several homeowners who had entered a trial mortgage modification said they were stunned to be told, on several occasions, that they were in arrears on their mortgage, while they had been making all the trial payments as instructed. In these cases there apparently has been little or no communications between the servicer's modification personnel and the collections personnel.
Second chance?
Since it was created last year as part of the stimulus package, the HAMP program has temporarily modified one million loans, but by the end of 2009, only 66,000 of those had been made permanent. Those who were denied were often left in even more dire circumstances. Many have already lost their homes to foreclosure.
This week Fannie Mae announced it is giving all those people who were denied a modification a "second chance." In a directive, it is requiring all of its loan servicers to consider "Alternative Modifications" to borrowers who were denied permanent modifications under HAMP.
But there is little evidence the delays and red tape plaguing the program from the beginning have been eliminated. And it remains to be seen how eager homeowners who have been through the nightmare once will want to do so again.
