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Why Struggling Bank of America Mortgage Customers Are Out of Luck

The odds of getting a financial firm to modify your mortgage depends on the loan servicer. And if you're a Bank of America (BAC) customer, your chances are markedly lower than people whose loans are handled by other big financial firms, according to a new analysis by ProPublica.

The investigative journalism outfit found that B of A provides less than half as many modifications as Ocwen (OCN), another major servicer. More than 60 percent of borrowers who had applied for lower mortgage payments with B of A have failed to get a permanent modification, while 39 percent succeeded.

Among the nation's eight largest loan servicers, American Home Mortgage has granted the highest percentage of permanent modifications, with 65 percent of applicants securing a mod through the government's HAMP initiative or the company's in-house program. No. 2 on the list was Wells Fargo (WFC), at 50 percent, followed by Litton Loan Servicing (45 percent); Citigroup (C) and JPMorgan Chase (JPM) (each at 43 percent); and GMAC Mortgage (40 percent).

JPMorgan took the prize for being the slowest to grant a modification. The banking giant took an average of 11 months to alter loans after borrowers became delinquent. Ocwen was the fastest among big servicers, at seven months.

Welcome to purgatory
Of course, if you're like a lot of homeowners who have sought mortgage relief, you're more likely to be stuck in what reporters Olga Pierce and Paul Kiel call "limbo" -- neither approved nor denied for a modification. That reflects the abysmally poor job large servicers have done to process modification applications. They write:

Ideally, servicers would be in contact with troubled borrowers, discussing possible alternatives to foreclosure. But servicers aren't doing that with most homeowners at risk of foreclosure -- and they haven't improved much. Servicers generally have multiple alternatives to foreclosure, including modifications, short sales and deeds in lieu, all of which are generally better outcomes for both homeowners and investors.
"If you have names, addresses, and phone numbers for your customers, it seems like you ought to be able to do better than reaching one out of three," said Mark Pearce, formerly North Carolina deputy commissioner of banks.
Yes, it would seem so. But three years into the financial crisis and with foreclosures continuing to surge, financial firms have shown only modest improvement in handling modifications. Meanwhile, U.S. Treasury data show that borrower complaints about servicers, notably lost paperwork, have steadily increased. ProPublica estimates that as many as 460,000 homeowners may have been wrongly rejected for modification because servicers lost their documents.

The bottom line is this: Only a fraction of homeowners who need help are getting it. That bespeaks a massive failure of public policy. It's also a shameful stain on companies that owe their existence to customers that, as the foreclosure crisis rages on, it is clear they have abandoned.


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