Loan modifications a struggle for Treasure Coast homeowners
June 18th, 2009 by TCPalm.comSince March, Leroy Stennett has spent more than 10 hours talking to seven people in five departments at Bank of America about getting his mortgage modified.
In 2006, Stennett and his wife purchased a house in Port St. Lucie for $285,000, putting $95,000 down and adding another $5,000 in closing costs from the sale of their previous home.
“My house is worth $120,000 now, so, I’ve basically paid it off, but they don’t want to cut me a break,” Stennett said about his lender, Bank of America. “Every time I call, I talk to a different person, so I can’t get any real answers.”
Like thousands on the Treasure Coast, Stennett hoped President Barack Obama’s Making Home Affordable plan would help adjust his house payments after applying for a mortgage modification. But frustrated homeowners, who remain current on mortgage payments despite economic setbacks, say they are confused about the modification process and aren’t getting support or cooperation from their lenders.
“We need some serious help now because I don’t know how long I can do this for,” said Stennett, who has gone through the majority of his savings just to keep up with mortgage payments.
Last year, Stennett lost his construction job and took a much lower-paying job at a country club. After being downsized from her administrative position and making an exhaustive job search, Stennett’s wife moved back to New York to find a job there so she could help pay for the mortgage. She is still searching for employment and staying with family.
Obama announced on March 4 the $75 billion Making Home Affordable plan designed to help 9 million people stay in their homes. But Florida real estate experts and housing analysts say the plan isn’t working because it doesn’t factor in the millions of homeowners who owe significantly more on their homes than the home’s appraised value.
Some even describe the plan as merely a public relations effort, giving the impression the Obama administration is working to fix the collapse of the real estate market. But in reality, critics say the program lacks accountability and does not offer principal reductions on homes that are severely upside down, one of the major problems in Florida’s housing crisis.
“There’s no friendly way to say this, but (Making Home Affordable) isn’t the knight in shining armor we thought it was going to be,” said Valerie Saunders, president of the Florida Association of Mortgage Brokers. “I haven’t heard of one person who has had a successful loan modification.”
Jack McCabe, chief executive officer of McCabe Research and Consulting, a real estate consulting firm in Deerfield Beach, describes the Making Home Affordable plan as a failure in Florida.
“For all the press the banks and CEOs are getting for their efforts in refinancing and modifying mortgages, it’s extremely difficult to gather any real results from them,” McCabe said. “I think lenders were extremely unprepared to deal with this. And they still are.”
Major banks all declined to give specific information on how many mortgage modifications are in process or have been completed in Martin, St. Lucie and Indian River counties under the Making Home Affordable plan. Nationwide, Bank of America said 20,000 trial modification offers have been sent to borrowers while JP Morgan Chase & Co. has started 15,000 trial modifications. Citibank and Wells Fargo, the new owner of Wachovia, declined to give numbers or comment on the program.
When asked about the program, banking executives gave the plan high marks despite skepticism from homeowners and critics.
“It has taken time to get Making Home Affordable revved up, but we see it as an excellent program for borrowers, investors and servicers,” said Tom Kelly, JP Morgan Chase spokesman.
Under the program, lenders get $1,000 from the Department of Treasury for processing a modification or refinance application and an additional $1,000 if the applicant is approved.
Nationwide, the agency has “extended over 150,000 offers for loan modifications,” said Meg Reilly, a spokeswoman for the Treasury.
Sebastian resident Carol Coker argues the program should do more for homeowners who are struggling with high mortgages larger than their home’s value. She purchased her home for $350,000 in 2006 with a variable interest rate and a $70,000 down payment. Recently, her lender said under the program, they would agree to a fixed interest rate at 5 percent for five years, which would increase to about 8 percent thereafter.
“That doesn’t help me at all because my home is worth $185,000 now,” said Coker, a registered nurse. “I know a lot of working class that are in my same situation, working day and night just to pay off these big mortgages.”
Michael Larson, a real estate analyst with Jupiter-based Weiss Research, said the housing market nationwide and on the Treasure Coast will not make a full recovery until lenders agree to massive, across-the-board principal reductions.
“The reality is you can cut someone’s payment to $1,100 or $1,200 by cutting their interest rate in the short term, but is someone really going to stick around in a home that they owe $50,000, $100,000 or $200,000 more than what the home is worth, in the long term?” Larson said. “They’ll never see that money back and probably won’t even break even until they’re in a nursing home, so, (the program) overpromised and under-delivered.”
The main flaw in the design, he said, is the resistance of the president to get lenders to cut principal.
“Nothing’s going to work until that happens,” Larson said.
By Nadia Vanderhoof, TcPalm.com
Tags: application, bank, beach, ceo, chief, club, critical, cuts, employment, Florida, housing, informant, jobs, lender, loan, money, nurse, nursing, Obama, sale, sales, search, trial, value, wife
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June 18th, 2009 at 10:44 am
Homeownership—THE AMERICAN DREAM–more like NIGHTMARE!!
If I didnt have kids living with me, I’d let it go into foreclosure.
June 18th, 2009 at 10:47 am
I would like to hear more on this subject. Can someone please research to see who has attained these new modification loans and was it really worth it?? 75 BILLION dollars!!! And the mortgage companies cannot even work with you? I still say that Obama should have just given every US Citizen $100,000.00 to stimulate the economy. I’ll bet my way would be cheaper than the way he did it…throwing it away on car dealerships and banks who don’t really want to help the people. It’s a shame that to benefit from anything you have to be unresponsible and let your home go into foreclosure…..such a shame…..
June 18th, 2009 at 11:40 am
I’m trying to refinance with Bank of America. I am a 30 year customer of the bank. President Obama gave them Billions of our tax dollars and there is not enough paperwork in the world that I could provide to get approved…Bank of America is keeping all that FREE MONEY for themself; cover operations & bonuses.
My Congressman Ron Klein voted for all the money give-a-aways to AIG, Bank of America the UAW, and the American People are left hanging in the wind.
June 18th, 2009 at 11:48 am
I think Obama has done a great job my husband and I were approved for the loan modification and our mortgage is reduced a whole $1000, maybe you need to look into your mortgage company, our company worked with us and we can now afford our home.
June 18th, 2009 at 11:59 am
I’m not sure where we all got this sense of entitlement from but I’m going to write a response that is probably going to be offensive to some, and refreshing for others. I will start this by saying that I do not work for a bank and even I am a struggling homeowner who is upside down and behind on payments. Fortunately for me though i have a more realistic perspective on my situation and who’s fault it is. I once knew a gentleman who invested a large portion of his life savings into a few safe and conservative stocks. Over the course of the next three years his $350,000 turned into $200,000 before he finally cut his losses and pulled his money out. When this happened he didn’t/couldn’t go back to E-trade and ask them for his losses back because it was not a game; the 150,000 he lost was gone and nobody was going to reimburse him. So why all of a sudden is it ok when a banking institution lends somebody hundreds of thousands of dollars and the investment vehicle that consumer picked out lost value, do we go and ask the bank to take the loss. When anyone buys a home they made an investment with someone else’s money. Now they are mad because the investment failed and the market is declining. News Flash: thats not the banks problem. If you lend me $10,000 to start a business, and in return you will get your $10,000 back plus an additional $8,000 for taking the risk in my investment. Then my business fails for whatever reason can I call you up and tell you that I’m only going to pay you 2000 back? I don’t think you would be very happy about that. Truthfully you should lien my business or sue me.
That is the simple way of putting my opinion; now I want to address all the balance reduction junkies. The homeowners described in this article are a rare breed, but I can tell you that if they have ARM mortgages that post modification are going to end up at 8% than they were high risk subprime credit borrowers from the word go. Furthermore they must have had an interest rate north of 9% prior to the modification that is described as not being helpful. I want to do the math for these greedy individuals.
Ex # 2: The individual who paid $350,000 in 2006 and put $70,000 down. should currently owe (taking into account 3 years of timely payments at and approx. rate of 8.5%) should owe about $275,000.
Modifying the rate down to 5% saves the client about $650 a month. ($39,000 over five years) AND the client will be paying down principle balance at an accelerate rate. so not only will they drop the payment by $650, at the end of five years they will have payed down an additional $10,000 in balance (Recap - 5 yrs saving $39,000 in payments AND reducing the balance $10,000 more than if they had been making the higher payment all along leaving a balance of 260 instead of 270.
Keep in mind all loans are calculated with front loaded interest, and dropping the rate in the first 10 years of a loan to a below market rate is a huge saving in the grand scheme of the loan, not to mention creating affordability for the homeowner.
It the client got the balance reduction they are looking for and kept the adjustable 8.5% interest rate after five years they will have only paid off 5K dollars of their new balance and the payment would have been $28 higher than the original balance at 5% and thats if the loan remained at an average of 8.5%. So the only person who could possible benefit from a balance reduction is someone who is looking to sell the home for a profit in the next 5 years. Now if thats the case then I would go back to my original analogy; not only is my business failing and I want you to take a loss for my failed investment, I actually want to profiteer on the loss that you will take for the money you lent me in good faith. When you put it like that it sounds kinda greedy if you ask me. but then again i’m just an average Joe with an basic understanding of the mortgage business. My income is not a million a year and I am currently applying for a modification of my rate with my own lender in hopes that i can afford my own home with my new income. The difference is i will be grateful for any help the bank gives me instead of saying its not good enough. I screwed up, not the bank.
Thanks for reading
June 18th, 2009 at 12:15 pm
Now i’m having the opportunity read these other comments from readers about the bailout money. AKA TARP funds. I know that most of what you hear around town is that these banks are getting obscene amounts of money and not doing anything to help the consumer. I want to point out that all of the TARP funds are loans not grants. these loans carry an 8% interest rate. As a taxpayer, I am happy to make 8% on my money by lending it to an institution for a few months (a lot of the banks are already repaying the borrowed money). The billions of dollars that everyone is hearing about is a carrying cost for a bank. almost like an American Express. All it does is allow the bank to make payroll and lend some new money so they can start creating cash flow again. without cash flow banks are out of business. American Express cards help people every month fix cash flow issues by floating money for a month or two. So why do we shun the banks for doing it? because instead of a few thousand dollars that we need to run our small businesses or lives; the bank needs a few billion dollars? Banks use billions and move billions of dollars every quarter, we may run through 10K on an average quarter. It only makes sense that banks would need billions to fix the issue. Thank god we have the money to lend them.
June 18th, 2009 at 4:05 pm
I have been successful in reducing both interest rates and principal balances on mortgage loans, resulting in payment reductions of anywhere from $650 to $1,800. Most recently we achieved modifications for a couple who owns 2 homes; their primary residence and a rental home in the same neighborhood. The rental home’s principal balance was reduced from $414,000 to $386,000 and the interest was reduced from 7.875 to 4.29%. The primary residence was modified from $440,000 to $331,800 - about 25%! The interest rate was reduced from 7.75 to 3% reducing the payment over $1,300 a month! Both of these homes were seven months past-due and ALL arrears, penalties and fees were forgiven. This coupl can now keep their home and the rental property’s income actually covers the cost of ownership.
Yes, Modifications do work. They work for your primary residence, they work for your second homes and investment properties. We do get principal reductions, but, admittedly, only about 20% of the time. Some lenders just don’t know how to make this all work yet. You WILL NOT get these results yourself, nor from your friendly neighborhood non-profit, Help for Homeowners office… Our processors and negotiators worked diligently on these modifications for over 3 months before receiving an acceptable agreement, and we do not usually accept the first offer that comes through from the bank.
Honestly, the most difficult modifications are for people who are NOT delinquent or in default on their mortgage payments. You just can’t get the lender’s attention when they’re overloaded with thousands of foreclosure or pre-foreclosure files. I would like to see that segment of the market served through HAMP or Hope for Homeowners before EVERYONE stops making their payments just to get the deserved attention. The sooner the better!
June 18th, 2009 at 5:02 pm
Good Article. I agree with most of those leaving comments. Maybe I can shed some light on an elusive subject.
The loan modification business that the lenders and homeowners are finding themselves caught up in is not only extremely stressful, but can and is being accomplished by many with a valid hardship. **A home with negative equity is NOT a hardship. With keeping that in mind, if you have a legitimate hardship; loss or reduction of income, little or no savings, maxed out cards, extenuating circumstances that can be documented and presented to your lender, chances are your mortgage will be modified to fit your current situation.
The banks are inundated with requests. Homeowners; if doing this on your own must be persistent and submit complete packages with anything and everything asked for in that application.
Follow up, Follow up Follow up! Leave nothing to chance that they received what you just sent in. Document dates, times, first/last names/extensions/titles of those you spoke with and expect to wait for awhile, but keep calling!
I am a 20+year veteran in the mortgage business, owning and managing both a mortgage banking/brokerage and title business. For the past year many calls we receive from clients that cannot refinance we will refer to a professional law group who handles the modification, forbearance, or short sale for them. I have personally witnessed many clients mortgages restructured, through the law group; with anywhere from a new interest rate of 1.3% to 5%, whereby many had rates a lot higher than that before they came to us; and past due payments rolled into the loan.
Many of us are frustrated we are upside down on the loans, We have several ourselves, and have done modifications on our own portfolio. Banks are working with the homeowners, either thru the new Fed program or on their own terms. The banks do realize that more foreclosures, on top of the existing backlog of them only makes matters worse.
I was told by one National lenders local office that they receive in excess of 1500 calls per day from homeowners requesting help on their mortgages. The law group I send my clients to has over 70 case managers, processors and intake workers to handle their tremendous workload. Where it used to take 60-90 days to obtain a modification, it now could take 6 months or more depending on the lender because of the back-logs lenders are experiencing.
The Fed program has caused many of the lenders to resubmit all of their files under the new Fed guidelines. Will this help all? Of course not, it is expected to help 25%-30% of those in default or immanent default.
It’s a start. Remember, we’re Americans. We don’t give up easy! There are a lot of very smart folks out there and when the going gets tough, the tough get going. Whoever you feel helped get us into this mess, those “smart and tough” ones will eventually get us out. No one wins from this. Whatever money Wall Street made, they have lost ten-fold in this debacle.
We’re all in the same boat, it’s just that some are close to the iceberg and others have struck it. I don’t mind if the editor prints my name and/or email address. I welcome any comments, criticism or folks reaching out for help. I’ve been dealing with the banks and attorneys long enough on loan restructuring and modifications to be able to know what can and/or cannot be done in this market.
This is a fact: for all those looking for a principal reduction and/or what is called a “cram down” don’t hold your breath. Less than 10% of all mortgages modified last year involved a reduction in loan balance. Good news is, we should see more this year as the Fed programs call for, as a last resort a reduction in principal, but I have yet to see this. It’s still very early as banks are just now using the new Fed guidelines.
Closing thought: Remember, first and foremost, a home was always to provide shelter for our families. Our parents and grandparents goals were to get it paid off as quickly as possible.
But, when it turned into just another investment, like a stock, and the banks provided all these “exotic” mortgages, a feeding frenzy occurred. Some of the average homeowner’s who just wanted a roof over his/her head decided to play the old game of “Monopoly” and the banks accommodated us. You can’t blame the banks entirely, they filled a demand. Hindsight is 20/20; but we can now say the old 20% down payment rule & verifying income & assets was not a bad way to grant a mortgage.
The principle of supply and demand was in full swing again, not on Wall Street, but on Main Street. Almost everyone you talked to was “rolling the dice” in the housing market. Exchanging stories of who made how much on what home, condo, lot, etc. It couldn’t last, we knew it, but no one had the crystal ball to see when it would stop. Boy, did it stop! And go full speed in reverse. Not only did the real estate market go south, but it took the job market, banking industry, auto industry, and many others with it. Time will tell; hopefully sooner than later.
But let’s all make a promise to ourselves, no more could have, would have, should have like our parents would say. Move on, make the changes necessary today to ensure that you, your family, your loved ones will be able to get through this “hiccup” and not come down with a full blown sickness. Call your lender, ask for the “hardship package” ask them to convert your adjustable to a fixed, ask to lower your rate, ask to have the past due payments rolled into the loan. Learn from your kids, “Don’t take NO for an Answer!”
Good Luck to all.
P.S. This article was forwarded to me by a client that called for a loan modification!
June 18th, 2009 at 5:34 pm
I have recently been throught the modifcation process.
It can be done, but you need professional assistance to make it happen.
Our experience was not a nightmare & we are very pleased with the outcome.
Contact a reputable FHA mortgage broker such as Fidelity in Palm Beach Gardens.
They can help you because they do not want to risk losing their FHA status when the loan business rebounds.
A legitimate hardship & loss of equity is the key to modification.
A financial institution does not want you to be upside down any more than you do.
The administration has made it easier for them to restructure your existing mortgage w/o refinancing.
It is not too good to be true, it is true & can be a reality if you put in the effort.
December 19th, 2009 at 4:24 am
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January 2nd, 2010 at 7:52 pm
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January 21st, 2010 at 3:45 pm
I need a $39,000 GRANT
for a home mortgage. Can you get one for me?
Please, help me get a mental Disability Handicapped Grant to buy a house for me and my wife for us to live together and help other people with disabilities. If you can’t help me; then, forward this request to source that will help me find a mental handicapped loan to buy a home for me. Please read the following: I can’t buy a house because I have Tourettte Syndrome who was fired from teaching 7 out of 9 school districts abusing students mentally and physically. I’m a 70-year-old male with a mental disability of a Tourette Syndrome disorder. …. I would like to get grant money to help me pay for my house purchase since I can’t work or be around people in public or private. Please contact me about this: 909-336-0472 or email jimculler@verizon.net More infor about me and applying for grants: I have a rare mental disability: Tourette Syndrome. It’s a disability that doesn’t allow me to function in society. I applied to 99 federal agencies on grant applications of which they don’t give grants to individuals because of the scams telling people that they can get a grant for them just by sending $1.95 and they will will send a CD telling how to processed a grant; then, will charge up $99 every month on your credit card.
Here two unique things that separate myself from other individuals getting a grant…….
1. Senior Citizen relating to helping older people. 2. 20 years experience of marketing needs of individuals in life. 3. Compiled and edited a “Manifesto of Life” that has over 1000 affirmations of getting what you want in life documented by Bible verses. 4. 30 years of teaching experience. 5. Seeing objectives and goals through.
Here, are (5) examples of replies saying that about my application for a grant…
(1) Your application and proposal have been reviewed and has been determined
not to meet the requirements of this Grant opportunity. We were seeking a
cooperative agreement with a local entity which would work closely with the
BLM to provide maintenance of existing campsites, trail improvement, kiosk
repair, eradication of non-native invasive species, and other restoration
activities along the Molalla Corridor, allowing the targeted participants
in Clackamas County, Oregon, a mix of work experience, natural resource
education, citizenship values and skills in service to their community,
not for a comprehensive approach of reaching out to individuals who are
experiencing hardship during these economical times. The funds are
intended for support of community crews working in the natural resource
environment rather than in workshops and seminars do not qualify you for grant.
Again, thank-you for your interest.
(2) The grant opportunity was for a single source entity. It has very specific qualifications on who can apply for the grant, one of them being for salmon and Steelhead facilities located in the Snake River basin to compensate for the lower Snake River fish losses in the state of Idaho, Washington, and Oregon. The grant opportunity also listed the facilities that could receive the funds. Your organization did not qualify.
(3) We appreciate the effort you have put forward in your application but regret to inform you
you do not meet the minimum requirements; specially a state agency, territorial
government, or tribal organization community. We wish you the best in your search for
funding and incite to apply for future opportunities.
(4) The grant opportunity was for a single source entity. It has very specific qualifications on
who can apply for a grant, one of them being for salmon and Steelhead located in the Snake River basin….. Th grant opportunity opportunity also listed the facilities that could
receive the funds. Your organization did not qualify.
(5) Thank-you for your recent submission of the project entitled “Manifesto of Life” to the
U.S. Fish & Wildlife Service Mountain-Prairie region Migratory Bird Management
Program……..
Unfortunately we are not able to fund your project at this time for the following reason:
X Your project does not fit within our current highest regional and/or national priorities.
(The above 5 examples are incomplete letters to myself and the personal signatures and names were left out for protection. If you need t see the full letters of rejection, the letters are on file for review for documentation.)
In cooperation for reply,
James L. Culler
909-336-0472