Mortgage modification hell

This guest post comes from Andrea at Fools and Sages.

For the record, I’ve all but given up trying to get my mortgage modified after a job loss at the end of March.

My family is a perfect example of the type of family I would have thought would be a shoe-in for a modification -- we were fine when I was working, making our payments without any trouble, darn near perfect credit, just about as regular as a family can be.

• Bing: The real unemployment rate

The modification program was pretty straightforward, but I’ve read too much online, talked to friends, and have my own experiences, and I’m here to tell you that the bottom line is that the banks that are receiving this government money do not want to talk to you. They would rather wait until you go into foreclosure, figuring you will do whatever it takes -- take on more debt, raid your retirement account, borrow from family -- to make your payments if you can, and that means they’re still getting paid.

I know this is true because a rep from my lender flat out said to me, when I said there was a limit to how long we could stretch our reserves while they put me off for months on end, “Well, let’s think of it this way -- if this bailout WASN’T in place, what would you do?”

I’ll admit, my response probably wasn’t perfect. I believe it was along the lines of, “You did NOT just say that to me, did you?” But that didn’t even cause him to miss a beat, really. His response was (paraphrased), “No, really. You would find a way to pay your bills. Why just because this program is out do you think you deserve any expedited treatment? Other people are worse off.”

Considering that this was four months after I had started trying to get this done and hadn’t even been assigned a caseworker, I thought that was a pretty interesting conversation.

I have been trying to send in my documentation since the beginning of April. All we need is to have an adjustment to bring us to 31% of our gross income, which would make enough of a difference for us to be fine until things settle out. It’s not that difficult (something I also maybe shouldn’t have said but did) and I even offered to figure out the payment and resulting interest rate for him.

In the same conversation, I was also told that the program was very complicated and it had taken a while for this very large bank to figure out how to implement it. I asked him how exactly it was complicated, and he told me that it was difficult to explain.

I asked him if it really was and then said, “Here, let me give it a shot: You take your gross income, and multiply it by 0.31. That is what the new monthly payment would be for five years, which would be achieved probably by adjusting the interest rate. You need to include my HOA fee, hazard insurance and property taxes in that figure but you ARE allowed to exclude private mortgage insurance -- but, for the record, we don’t have any. You are responsible for whatever difference in that amount brings you to 38% of my gross income, which isn’t much, and then the government subsidizes whatever it takes to bring us to 31%. The program only covers debt from first mortgages, not second mortgages or credit card debt. Does that about sum it up?”

The conversation went downhill from there, after the two or three seconds of silence on his end that I took with at least a little bit of satisfaction.

It is infuriating and distressing, and the only consolation I have -- and I am incredibly grateful for it -- is that I do have a support system that we can fall back on if we really need to. I can’t imagine what kind of stress is being experienced by Americans who have gone well beyond squeaking by and are without incomes altogether, and it makes me think the sentiment expressed in this article about a protest outside congressional discussions about the effectiveness of homeowner rescue programs is dead on: 

While applauding the Obama administration for getting the Home Affordable Modification Program up and running, some questioned whether the $75 billion being paid to mortgage servicers would do more good if instead it was lent to homeowners, especially the growing ranks of the jobless.

“Getting a homeowner’s DTI [debt-to-income] ratio to 31 percent won’t help the unemployed, since 31 percent of their income is zero,” said Paul Willen, a senior economist and policy adviser at the Federal Reserve Bank of Boston.

Irwin Trauss, supervising attorney at Philadelphia Legal Assistance, told the oversight panel that money repaid by lenders who took Troubled Asset Relief Program money might be used to structure a national program along the lines of the Pennsylvania Homeowners’ Emergency Mortgage Assistance Program. That program provides loans to unemployed Pennsylvanians facing foreclosure to help them make mortgage payments until they return to work.

Hmm.

I know there’s plenty of debate in other arenas about the government’s ability to provide timely assistance to anyone, with visions of people dying in hospital hallways and such, but if what we’re seeing in the mortgage industry right now is indicative of the efficiency of the market, I don’t think I can accept that bit of soshulizm fear. Actually, the banks are being very efficient -- about spending as little as possible to not modify mortgages. That’s sure how it looks to me, anyway, and to the people I’ve spoken to in similar situations. If there’s a problem with our perception, the banks sure aren’t doing much to remedy it.

Oh, and a little addition to my own saga: I received a letter dated Sept. 1 stating that if I didn’t send in all of my documentation again (this would be the third time -- crazy how stuff gets lost, isn’t it?) plus one other document, in one single package by Oct. 1, I would be thrown out of the system altogether and would have to start the whole process over again.

Almost six months of being put off, ignored, told to call back in 30 or 60 days, or please not to call at all, “we’ll call you,” and then I get a letter saying that if I don’t send in documents to their random fax machine within their arbitrary time period, we have to start over.

Is it any wonder Americans are upset at banks?

Note from Karen: Andrea’s post appeared at Fools and Sages on Sept. 24. Here is an update from her:

As of the beginning of November, the situation has deteriorated to the point of denial. They have determined that ours is a "temporary hardship," and that we couldn't make the payment proposed, which is interesting because we also submitted a budget that clearly showed that we could.

They did offer to do a forbearance, which would reduce our payment for a few months, but again, this is because they're betting I'll get a job. They don't want to take any kind of permanent hit at all, even if the government is bearing the brunt of the cost.

Related reading at Fools and Sages:

• Take these guys down a peg, PLEASE
• Bank errors, accountability, the government, and you
• Enough from the banks