June 18, 2010
Mortgage help stymied by paperwork
Problems reported with program aimed at helping homeowners
- Some homeowners trying to avoid foreclosure say that one of the best options for homeowners in trouble is marked with delays and confusion.
According to New Hampshire Housing, 361 foreclosure notices were reported for the month of April, the second worst month for foreclosures in state history.
One way for some homeowners to avoid foreclosure is a process called mortgage modification. But even qualified customers are having trouble getting a modification.
Don Durfee, of Goffstown, said he is working four jobs so he and his wife can keep up the mortgage on their home of 20 years.
"I've got to pay for the house, I've got to pay the bills, and do the best I can," he said. "That's what I'm doing."
Last fall, the couple was tight on money. Durfee said they were approved for a mortgage modification trial period from their lender, CitiMortgage.
The program lowered their interest rate and monthly payments. If they kept current on their bills for three months, the modification could be made permanent.
Durfee said he and his wife did their part, but then communication seemed to break down.
"The paperwork never goes to people it's supposed to go to," he said.
Durfee said he worked with the bank for months, sending in documents on four occasions. He was even able to produce the fax sheets. But in May, he was rejected for mortgage modification for "not providing documents requested."
"That's four times we've sent in the documents since this all started," Durfee said. "It's basically like we never sent them anything."
Durfee is one of hundreds of Granite State homeowners caught up in something that was supposed to help. People who lost jobs or had hours cut thought they could avoid foreclosure by modifying their loans, but the process has been loaded with confusion.
U.S. Sen. Jeanne Shaheen said that in a year and a half, 600 Granite Staters have contacted her office to say that the modification process is broken.
"For most of the time I've been in the Senate, this has been the No. 1 constituent concern I've heard from people," Shaheen said.
The process should work by allowing someone who can still pay most of the mortgage to qualify to have it modified with a lower interest rate or longer term. That will lower the monthly payments to 31 percent of the household income. Homeowners avoid foreclosure, and the bank still collects on the mortgage.
The process involves a lot of paperwork and communication, but officials said many large out-of-state loan servicers have never dealt with it before, allowing cases to get lost in the system.
Robert Tourigny of Neighborworks Manchester helps people on the brink of losing their homes. He said there has been improvement in the modification process, but he said "lost information" is still an issue.
He said that for some homes, banks may rather foreclose than modify, but in some cases, federal rules require lenders to offer the modified loan.
"One of the requirements under the modification program is for the servicer to run a 'net present value test,'" Tourigny said. "(That) determines if the holder is still going to make money under the new modification. If they are, they need to offer that modification to the borrower."
Tourigny said if you're interested in a modification, you should first contact your lender to see if you qualify. A typical trial period for a loan modification is three months.
If approval drags on, contact a local housing counselor, who may have more direct contact with the bank.
Officials said that about half of those who hope for loan modification don't earn enough to qualify. They may have other options, such as selling the home in a short sale in which the bank allows the sale of a home for less than the value of the loan.
Some aid may be on the way to help resolve issues with the modification process. Shaheen has proposed legislation that would penalize banks who don't work with homeowners and create an appeal process for those who get rejected.
As for Durfee, CitiMortgage sent News 9 a statement, which said, in part, "We regret any inconvenience that may have been caused due to documentation issues. However, a recent upgrade to the Treasury Department's HAMP administrative tool should address and resolve this type of documentation inconsistency. ... We are continuing to work with this customer in attempting to find an appropriate solution for his needs."
Experts said that if you think you may be facing financial hardship, don't wait until foreclosure is imminent. Contact your lender or counselor right away.
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