New Measures Intended to Speed Up Loan Modifications
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- Kirk Haverkamp | November 30, 2009
The White House is turning up the pressure on lenders to step up the pace on finalizing mortgage loan modifications for at-risk homeowners, among widespread complaints that many banks are dragging their feet.
New measures introduced today by the Treasury Department include requirements for lenders to document their efforts to finalize loan modifications that have successfully completed a three-month trial period. Other measures include the creation of new consumer resources to help them through the loan modification process.
More than 650,000 homeowners have begun trial loan modifications to date under the administration’s Making Home Affordable (MHA) Program, but it appears that relatively few of those have been made permanent to date. With 375,000 of those scheduled to complete their three-month trial period by the end of the year and be eligible for conversion to permanent modifications, the administration is pushing lenders to complete as many of those as possible.
“We are encouraged by the pace at which trial modifications are now being made to provide immediate savings to struggling homeowners,” said Phyliis Caldwell, the new chief of Treasury’s Homeownership Preservation Office. “We now must refocus our efforts on the conversion phase to ensure that borrowers and servicers know what their responsibilities are in converting trial modifications to permanent ones.”
Leders required to report status of trial modifications
Among the new measures announced today, major mortgage servicers will be required to submit schedules for making final decisions on whether to approve or deny trial loan modifications for which they have documentation and for communicating those decisions to homeowners. Services will also be required to report on the status of each trial modification in order to provide transparency to the process.
Services that fail to meet their obligations they accepted to take part in the program could be subject to monetary penalties and sanctions.
For borrowers, new resources are being provided on the MHA web site, www.MakingHomeAffordable.gov, to help borrowers obtain and submit the necessary documents for finalizing their loan modifications, as well as additional resources to help them understand the MHA loan modification process.
Widespread reports of delays
It’s not clear how many of the more than 650,000 trial loan modifications begun to date have been made permanent; the administration is not due to release initial figures on permanent modifications until December. However, there have been widespread reports of homeowners remaining in limbo for months after successfully completing their three-month trial period.
In a classic case of “he said – she said,” lenders are reporting that many borrowers are failing to submit the required documentation needed to finalize their loan modification, while homeowners are complaining that lenders are requesting the same documentation repeatedly or continually requiring additional documentation.
The situation is reminiscent of the early days of the MHA program last spring, when homeowners seeking loan modifications complained of being stonewalled by lenders, who in turn protested that they were overwhelmed by applicants at a time they were trying to get the program’s requirements sorted out and implement it. It was several months before the program began to see substantial numbers of trial loan modifications begun.
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