Interesting article in the WSJ on Loan Modifications
By RUTH SIMON
The Obama administration said Tuesday that its mortgage-modification program has enrolled one in five eligible homeowners, a sign the effort is gathering momentum after a slow start. But so far few of those trial modifications are turning into permanent fixes.
Whether the program will ultimately be judged a success will depend upon how many trial modifications become permanent.
The administration won't release figures on completed modifications until December, but so far it appears that very few trial modifications are becoming permanent, often because of a lack of documentation
"It's a fiasco in the making," said Alan White, an assistant professor at Valparaiso University in Indiana, citing preliminary information about low numbers of permanent modifications and complaints from attorneys and housing counselors.
"The good news is you've gotten all these homeowners in from the cold and on these temporary modifications," Mr. White said. "The bad news is we are stumbling in getting all these people...all the way" to keeping their homes.
It's not clear yet what will happen to borrowers who make payments, but don't submit required paperwork.
"We have gone the extra mile," said Assistant Treasury Secretary Michael Barr in an interview. "Now it's up to the servicers to close the deal."
The administration continues to look for ways to address challenges in turning trial modifications into permanent fixes, a Treasury spokeswoman said.
Loosening documentation requirements should make it easier to complete some modifications, said Sanjiv Das, president of Citigroup's mortgage unit, which has finalized more than 1,600 of the modifications. Roughly 70% of the 68,000 borrowers in the program are current on their payments, Citigroup said.
Still, some borrowers say their mortgage companies have kept them in limbo for months. Gerald Bullock of Cincinnati said he has made seven trial payments and provided J.P. Morgan more than 60 pages of documents, but this week got another request for documents.
"We don't know if we have a house to live in or not," said Mr. Bullock, who fell behind on payments after becoming disabled in a workplace injury. "It just adds to [my] anger and depression."
A J.P. Morgan spokesman said Tuesday that Mr. Bullock's final modification was approved Friday and paperwork finalizing it will be sent this week. "Unfortunately, we mistakenly called him for additional documents," the spokesman said.
In an effort to get required documents, Saxon recently offered more than 5,000 Florida and California borrowers in the trial program $25 gift cards if they brought their paperwork to a nearby company event. About 15% responded, the company said.
Freddie Mac, the government-controlled mortgage company, recently hired Titanium Solutions Inc. to go door-to-door gathering needed documents. "Most of our borrowers got into the loan with assistance" and need similar help with the modification process, said Freddie Mac Senior Vice President Ingrid Beckles.
Susan Cook, a real-estate broker who works as a home-retention consultant for Titanium, said borrowers often report that they have sent in their paperwork "two or three times." But "there is always some little piece that is probably missing," she said.
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