By Mark Huffman
ConsumerAffairs.com
July 22, 2010
It's no secret that the Obama administration's home mortgage modification program, which was designed to help troubled homeowners avoid foreclosure, was a big disappointment. And maybe it isn't a surprise, either.
Neil Barofsky, inspector general for the Troubled Asset Relief Program (TARP) told Congress Wednesday the Treasury Department failed to set clear goals for the administration's modification program.
"It's a simple recommendation that we made, that Treasury put forth how many people it truly expects to help stay in their houses through permanent modifications," Barofsky told the Senate Finance Committee.
The numbers speak for themselves. Of the millions who have applied for a loan modification over the last 15 months, fewer than 400,000 have been granted permanently modified loans. Early projections were that three to four million homeowners who were struggling to make payments would receive lower interest rates or reduced principal, helping them avoid foreclosure.
Consumer frustration with the modification process, managed by participating loan servicers, has been well documented on the pages of ConsumerAffairs.com.
From the beginning of the process, homeowners reported remarkably similar problems; lost paperwork, requests to fax the same documents multiple times, speaking with a different mortgage officer each time, and a perceived sense of both indifference and incompetence on the part of the servicer.
Falling through the cracks
Guy of Jackson, South Carolina, reported a typical experience last year in trying to work with Nationstar, the mortgage servicer that bought his Ditech loan.
"We were told what documents were needed and how to send them to Nationstar," Guy told ConsumerAffairs.com. "Those documents were readied and I faxed all eight pages to Nationstar. My fax machine printed the confirmation.
But several months passed and Guy said he was close to losing his home, without having heard from his loan servicer. "We contacted Nationstar and we were advised our loan modification process was never started because our necessary documents never arrived," he said. "I explained that I had a fax confirmation and I sent the documents months before. Nationstar advised us at that time to re-send the documents."
Elizabeth Warren, chairwoman of the Congressional Oversight Panel for the bailout and a leading candidate to head the new Consumer Financial Protection Agency, told the committee the program was too small and too slow.
"Fifteen months into this program, for every one family that appears to have made it to a permanent modification that's likely to stabilize that family in that home, 10 more have been moved out through foreclosure," she said. "This is a program that's behind the curve."
Warren said in many cases, loan servicers have little incentive to help a homeowner achieve a modification, since they stand to earn fees if the home eventually goes to foreclosure.
"It's just not a program that's working for homeowners," Warren said. "It's not a program in some cases that's working for investors. And most importantly, it's not a program that's working for the economy over all."
