Loan Modification Hell: 98 Loan Mods Done; 340,000 (Or More) To Go
The Treasury Department says approximately one million Bank of America customers are eligible for a loan modification.
It sounds like a lot, but of that large number, just 160,000 are in a trial modification program, a paltry 16 percent.
And of those, just 98 homeowners with Bank of America loans were able to get their temporary loan modification converted to permanent status in November under HAMP.
In addition to that small sum, Bank of America has completed a total of 230,000 loan modifications across non-HAMP programs, according to Dan Frahm, a Bank of America communications executive.
"In the past two years, Bank of America has helped more than 630,000 customers with a loan modification through our own programs or with a trial modification under HAMP," said Jack Schakett, Credit Loss Mitigation Strategies Executive with Bank of America, who insists the figures sound worse than they are.
While the government estimates that Bank of America has one million customers who are eligible for HAMP (because they are 60 days behind in their mortgage payments or at imminent risk of default), Schakett says the bank thinks only 340,000 customers are truly eligible for HAMP.
Of those, he points out, 160,000 are in a trial modification, or just under 50 percent.
The missing 650,000 homeowners (one million customers minus 340,000 that Bank of America believes truly are eligible) are ineligible for HAMP because they fall into one of these four categories:
- The homeowners have vacated their home.
- The homeowners no longer occupy the home as a principal residence.
- The homeowners are unemployed.
- The homeowners already have a relatively affordable housing payment of less than 31 percent of their income.
Schakett says the holdup for loan modification conversions stems from the requirement of underwriting the new loan, including verifying income, whether the homeowner is actually living in the home and tax returns. In addition, "the modification must be notarized by the borrower as well," he said.
Schakett says the bank has new systems and improvements in place to help speed up the conversion of temporary loan modifications These improvements include:
- The assignment of 550 loan officers to the loan modification division to help speed up the underwriting. Once they are moved into a trial modification, homeowners will have one point person to work with on their loan instead of being bounced around to different customer service reps. (As an aside, if there are 340,000 borrowers who will qualify for a loan modification, 550 loan officers won't even begin to make a dent!)
- Improved technology means all documents that are faxed to Bank of America are stored electronically, scanned and indexed when they are received. Schakett acknowledged that documents were being lost because someone had to go to the fax machine and manually distribute the documents to the proper person. He says this will no longer be an issue.
- All Bank of America customers have been converted to Countrywide's proprietary loan management system. The upside is that the system has allowed Bank of America to introduce some of the "robust" tools it uses to originate loans into the loan modification process.
Bank of America says homeowners who were put into trial loan modifications are facing a deadline of December 31, 2009 to return all of their documents, including required notarizations - or be deemed ineligible for a HAMP modification. The bank has undertaken a massive effort to let 50,000 of the customers in trial modifications (those who face the December 31 deadline due to when they entered the trial loan modification program) know they could lose out on HAMP benefits if they don't return documentation necessary to underwrite the new loan in time.
But just a fraction of Bank of America customers in trial loan modifications have sent in complete documentation, which is why Bank of America pressed to extend the deadline.
With the new deadlines, if you have some of your documentation in by December 31, you'll have an extra month to get these documents notarized and still qualify for HAMP. Bank of America says it will try to do a loan modification for customers who get rejected from the HAMP program because of blown deadlines.
"What you won't get is the incentive check," Frahm said, referring to the cash the government will pay those who get permanent loan modifications under HAMP and proceed to make all of their payments on time.
Bank of America has set up a website that it hopes will help clear up any confusion.
Ilyce R. Glink is the author of several books, including 100 Questions Every First-Time Home Buyer Should Ask. She blogs about money and real estate at ThinkGlink.com.