Government's loan mod program ineffective

A foreclosure sign in front of a home in Miami Beach, Fla.


Tess Vigeland: Troubled homeowners are certainly aware that financial transactions can follow you around. A foreclosure will affect your credit scores and your ability to borrow for years. That's one of the reasons for the various mortgage modification programs put in place by the Obama Administration. But as we've reported before, the effectiveness of those programs is questionable.

The investigative journalism group ProPublica has been looking into it and one of their reporters, Paul Kiel, joins us. Welcome.

Paul Kiel: Thanks for having me.

Vigeland: Now, you talked to more than 300 home owners. Describe for us their experience so far in these programs.

Kiel: Well, we characterized it overall as a nightmare. That's a pretty fair characterization, I think. The average time someone had been trying to get a modification, which we counted from the time that they reached out to their lender, and that was about 14 months. People, on average, had to send the same documents, they said, six times. And then there's all sorts of things about documents being lost by the servicer, given wrong information by employees when you call up the call center and that sort of thing.

Vigeland: Well, let's play a piece of tape from one of the individuals that you interviews. His name is Wallace. He's from Baltimore, Md., and here he is talking about his experience so far.

Wallace: I was sent a loan modification process, and I couldn't get any closure. Nobody would tell me anything. From Chase Home Finance, they kept saying, "Always send a mail." I send a mail. I grew up poor, I used to hear my mother say, "It's in the mail." It's not in the mail. Chase called me and they actually told me to miss two payments.

Vigeland: Now, I heard this tape and this is not the first time I have heard that a bank is telling people to actually go ahead and miss the payments. Why are banks doing this and what did Chase say when you contacted them about Wallace?

Kiel: Well, first of all, as what they say, they generally give somewhat of a boiler plate reply, in terms of, they're doing the best they can and to find the solution for the home owner, that sort of thing. I mean, as for why the banks might be telling people this, what happened -- definitely in the first six months of the program, and we think has continued to happen -- is that people who were keeping up with their payments, who basically were doing everything in their power to make those payments, they were kind of put to the end of the line. The people who were two months or more behind, were the ones who were considered first. It's kind of an auto-pilot, sort of dummy process for how those people were considered. If you haven't missed any payments yet, they kind of have to look at your financial picture to make a determination as to whether you're really telling the truth that you can't make your payments.

Vigeland: Now another person you interviewed, David Moe, he's 70 years old, a retiree. He just has had enough. His home is now in foreclosure. He shared something with you that was new to me. Let's take a listen to that.

David Moe: The man across the street came over one day, and he said, "I got a call from Chase, and they said you're behind on your mortgage and they can't get a hold of you. And they want me to tell you to call 'em." I was horribly embarrassed.

Vigeland: Now Paul, I had never heard of that -- a bank actually going and calling the neighbor. How does that happen?

Kiel: Well, I think it happens, because you have an industry that's sometimes pretty confused about whether it's trying to help home owners or whether it's mainly in the business of collections. And actually what happens at some of these banks is you have the collections department and you have what's called the "loss mitigation" department. And it may happen that a home owners working with the loss mitigation department, talking about their modification and so forth. And then they're getting separate calls from collections people saying, "Make your payment, make your payment, make your payment."

Vigeland: Where you do find home owners are placing the blame at this point? Are they really focusing their anger at the banks or at the government's loan modification program?

Kiel: Well, I think there's plenty of anger, so there's plenty of places to direct it. It's the short answer of that.

Vigeland: Yeah, very true.

Kiel: A lot of frustration with the Congress people. And actually, one thing that I found interesting is that members of Congress have bene flooded with calls from constituents. And some offices have even kind of dedicated staffers to this sort of thing and they've kind of turned into housing counselors in a strange sort of way. And one major frustration is that there's not really a place to go with these sorts of complaints, and that's definitely something I hear very frequently.

Vigeland: Paul Kiel is a reporter with the investigative news organization ProPublica and we've been talking about their look into the government's loan modification system. Thanks so much for the stories.

Kiel: Alright. Thanks a lot.

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I have been in app process with EMC mtg for 20 months with no res. Submitted 700-1000 documents some numerous times. Have been treated rudely, and lied to on phone.

Our mortgage is with OneWest bank (formally IndyMac bank) and all we want is to be able to refinance under today's low rate and they are not willing to help. We are current on our mortgage and have excellent credit but the bank is unwilling to work with us. One person will tell me they (OneWest Bank) are just the servicer and their hands are tied because of Fannie Mae's rules and regulations and another peroson told me 'the executives of this bank have decided not to participate in Obama's home affortability programs and they will not negotiate with homeowners. After researching OWB on the Internet, I found out they are among the worst for assisting homeowners and they (along with all banks) actually benefit more from foreclosing on homes then helping owners stay in them. The program has so many loopholes that benefits the banks, which make so they do not have to help anyone and can still collect millions of taxpayer dollars by just giving the impression they are.

I started applying for my modification in November 2009. I submitted the same forms 4 times & rejected 4 times, so I gave up. Then a couple of months ago a coworker referred me to a company which specializes in modifications. I submitted the exact same forms to this company & they got the modification approved! Yes, I did have to pay a fee for their service, but it was worth it; I couldn't get it done without an advocate who has some kind of inside contact. These companies have sprung up precisely because the lenders are doing everything they can to avoid the loan modification program.

Home Modification Assistance...
I have had my problems with Wells Fargo. I think most of the ones you mentioned. Also, for now 7 months since
I signed the actual loan modification agreement, I have received periodic calls from collections / loss mitigation about my "past due" status. Most ended with the person ACTUALLY reading my file and finding that the agreement was signed in February. No one has EVER apologized for themselves (not necessary) or the bank and its systems (I'll let you guess how I feel about them).

A recent call ended with the rep from WFHM telling me (after checking with management several times) that they would not be honoring the agreement.


We decided we would leave and rent or something. We also decided to take one more try. Since all of the progress on my modification came after outside inquiry / pressure, I contacted the MHA Help line (somewhere in the MHA webpages), wrote to the FTC and Comptroller of the Currency, worte to my state's Attorney General (Consumer Complaints), wrote to my Senators, and sent notes to Senator Dodd & Congressmen Frank as heads of the appropriate committees. I was also considering writing to CNN / HLN and a local station as each had been of assistance earlier on.

The MHA Help line hooked me up with a non-profit (MMI) who provided assistance including conference calls to WFHM and whatever their escalation folks do "behind the curtain".
It may have worked this time. I just got another letter saying my modification was approved (its February all over again). However, I now have access to my online account again (it had remained locked throughout the process despite multiple calls on my part), and, for the first time, my interest rate is the one in the modification. So, I am cautiously hopeful.

For the most part, I have no complaints about the government's role (which is limited). My only complaint there is that the banks seem to have been trusted to do the right thing, again.

I will not go into my complaints with WFHM, as this note is already much longer than I thought it would be. I will just say that at no point during the 19 months this has been going on has the process been made easy. Rarely has anyone checked the record before going into their spiel. Non of it was pleasant.

So, I will forgive (not doing so just hangs me up, not the bank) and not forget.

Thanks for the story which needs to be told until it is heard.

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