Not Enough Home Loan Modifications – According to Obama Administration

By Brandon Cornett | 7/20/09
© 2011, All rights reserved

Though the Home Buying Institute Q&A service, I’ve received a lot of questions about home loan modifications — most of them from homeowners struggling to keep up with their mortgage payments. I’ve noticed a trend. A lot of mortgage companies are not living up to their “big talk” about home loan modifications for their customers. They put out press releases about how they’re helping homeowners by modifying loans, but many of them just don’t measure up.

The questions / complaints I receive usually go something like this:

We heard about the mortgage modifications our lender was doing, so we looked at the qualification criteria for the program. We found out that we are perfect candidates for their home loan modifications, so we contacted them for help. The first person we spoke to didn’t know anything about the modification program, so he transferred us to somebody else. The second person took down our information and said that somebody would call us back within a few days. Three weeks later, we got a form letter in the mail that said they are unable to modify our home loan, but it didn’t offer any reasons why.

This is a pretty common scenario, though it does vary from one homeowner to the next. Take a look at the comments at the bottom of this mortgage assistance article, and you’ll see what I mean.

The thing that makes me angry is that these lenders are not living up to their end of an agreement. We (tax payers) bought all of their bad debt and flooded them with revenue in the form of low-interest loans from Uncle Sam. On their end, the lenders were supposed to create workable programs for home loan modification to help “no fault” homeowners who were struggling with payments. But for the most part, these programs have been a complete failure.

Obama Pushes for More Loan Modifications

I just read that the Obama administration is stepping up its pressure on lenders and loan servicers, to increase the number of home loan modifications they process. Treasury officials are set to meet with executives from the financial industry on July 28. Modification programs are the main item on the agenda.

The government’s primary request will be twofold — hire more people to expedite the processing of loan modifications, and do a better job getting the word out to homeowners. Many homeowners don’t even know who owns their mortgage loan at present, since they are often sold from one company to another. The government is pushing for more mailings (letters and postcards) to eligible borrowers, to let them know about home loan modifications and how to apply for one.

“There is a general need for servicers to devote substantially more resources to this program for it to fully succeed … We are asking all servicers expand their servicing capacity and improve the execution quality of loan modifications.” -Letter signed by Treasury Secretary Tim Geithner and Housing Secretary Shaun Donovan.

There’s a lot of confusion and misinformation about this topic, but we will do our best to cover it and keep you posted. I also recommend visiting the Making Home Affordable website, if you’d like to learn more about it.