The Banking Industry's Under Water Homes Crisis
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US Treasury Dept Unleashes Foreclosure "SWAT Teams"
The Treasury Department has started dispatching what it calls foreclosure "SWAT teams" to big banks to take a hard look at their operations.
The administration says it is cracking down on mortgage companies that aren't doing enough to implement President Obama's program to prevent foreclosures. The government hopes to help 3 million to 4 million people. But many economists say the program is stumbling, and that greater oversight is needed.
About 750,000 people have had their mortgage payments reduced so far through the president's Making Home Affordable plan. But the vast majority of those people — more than 95 percent — are just in the temporary trial stage of the program. Meanwhile, the foreclosure crisis remains one of the biggest threats to the economy.
Confusion At Bank Call Centers
Major banks including Bank of America, JPMorgan Chase, Wells Fargo, and Citigroup run call centers that determine the fate of millions of homeowners.
A few months ago NPR did a story on one of the main call centers run by Bank of America. Some homeowners were getting rescued from foreclosure and offered more affordable payments. But there were also some problems. At one point, a call center worker, Crystal Ingram, told a homeowner that he didn't qualify for help through the Obama plan. She told him, "At this point, sir, I'm not getting a recommendation for a modification." After punching his information into her computer system, it rejected the homeowner for help. But it shouldn't have.
When NPR pursued the issue with supervisors, it turned out the person actually did qualify. And the homeowner was later offered a loan modification. NPR has been following up with Bank of America. The bank says it has a second review system to catch such mistakes. But three months after our visit, the bank still hasn't been able to tell us why the computer appeared to be rejecting homeowners who actually were eligible for help.
Logistical Nightmares
Problems like this seem to be widespread at many of the major banks. Andrew Jakabovics, an economist with the Center for American Progress — a think tank that's aligned with the Obama administration — says there have been all kinds of complaints about these call centers.
"It's a nightmare, to put it bluntly," Jakabovics says. Homeowners say they fax in information and the banks lose it. They complain they get lost in automated phone systems. Some banks say people who make too much money are trying to get help when they don't need it and clogging the system. And certainly the challenge of managing the information and documents coming in from millions of borrows trying to get help is a daunting task for the banks.
Rescue Operations
This month, Michael Barr, assistant Treasury secretary, said the administration would dispatch "SWAT teams" to the banks, which are referred to in the industry as loan servicers. It turns out that the teams actually consist of three people making three-day visits to the banks. Barr also said that there might be fines for companies that aren't doing what they should be.
But many experts were underwhelmed by the government's crackdown.
Jakabovics says the problems with the program require more aggressive steps. He says the president's plan should be reaching a lot more people, which would be good for both the housing market and the overall economy.
It's hard to tell exactly what's tangling things up at the call centers.
"I still think there's a lot of 'he said, she said,'" Jakabovics says. The banks say borrowers don't send in all their documents to qualify for loan modifications. Homeowners and housing counselors counter that they've sent in the material numerous times and that they continually encounter bank personnel who say they've never heard of the previous person that they contacted about their case.
Given all these problems, why is the Treasury Department sending in SWAT teams for just three days?
Permanent Oversight?
Jakabovics says better oversight could help solve the problem and prevent more foreclosures. He supports putting government officials inside the call centers on a permanent basis.
"By having people in the call centers, I think we'd get to the bottom of this and improve the operation of the program as a whole," Jakabovics says.
Bank examiners already monitor all sorts of bank activity. When it comes to foreclosures, private insurance companies already have personnel stationed inside the banks: They assist with efforts to prevent foreclosures when the insurance companies are on the hook.
Phyllis Caldwell, the chief of the Treasury's homeownership preservation office, says the department will complete the three-day visits. But she adds: "We're committed to doing whatever it takes."
President Obama speaks after holding a Housing Refinance Round table with real people who have benefited from renegotiating their mortgages and explains how millions of others can take advantage of his Making Home Affordable plan.
NACA’s “Save the Dream Tour” Now Disappointing Thousands in Phoenix
It started this past July 31st and went through August 3rd, and 40,000 very nervous homeowners waited in long lines in the hopes of saving their dreams.
One woman, a 46 year-old single mom who had lost her job, fallen behind on her bills, but was working again, waited apprehensively to find out if her lender, Wells Fargo, would modify her loan or throw her out in the street. (I know that’s a harsh way of putting it, but I’ve decided that there’s been enough soft pedaling on this point.)
The event was yet another brought to homeowners by the Neighborhood Assistance Corporation of America, or NACA for short. The event’s brochure promised “Same Day Solutions” for homeowners who would get their loan modifications approved on the spot by many of the largest lenders and servicers in the country.
Bank representatives, dressed in their golf shirts with embroidered bank logos, would be on hand and would get things done for homeowners on a while you wait basis. NACA, a nonprofit based in Boston would be there with hundreds of housing counselors.
Wow. When I first heard about this whole “Save the Dream” thing, I thought it sounded absolutely fabulous.
When our single mom left the event that day she felt terrific. She was confident that her home would now be saved. A NACA housing counselor had reviewed her financial documents, and then she had met with a representative from Wells Fargo, who had agreed to modify her loan, taking her interest rate down from 6.375 to 4.375, and cutting her payment by more than $200 a month. Wells also agreed to a forbearance agreement that would allow her to skip the next six payments, and tack the amount onto the back end of the loan.
She was so happy.
The Wells Fargo representative couldn’t give her a written agreement, but it was a direct contact with her lender, and she watched as the representative wrote her name down along with her phone number and the promised interest rate… right on her NACA workbook.
She was so happy.
Fast forward to September 22nd, eight weeks later when she received a letter from Wells Fargo that specified very different terms than she was promised. In the letter it said that at the end of a six-month moratorium on payments, she would have to pay a balloon payment of all six payments missed.
So, as you might expect, our single mom tried to call her Wells Fargo representative at the number she had been given while she was saving her dream two months earlier… but she was never put through to her. Instead, Wells Fargo now told her to stand by… because Wells would be contacting her in a few months, at which time she could apply for a loan modification! And even better, Wells now said that it had no record of the agreed to interest rate reduction.
So, next she called NACA, left voice mails and sent emails but never got a response. And wouldn’t you know it… the identification number that she was given to track her file online on the NACA website didn’t work. Darn the luck.
So, now our single mom is concerned. She’s facing a balloon payment in January and is once again scared that she will lose her home… the home she purchased in 2002 with a 20% down payment…. the home in which she has close to 50% equity, but can’t refinance because of her credit score.
Now she’s angry. Very angry, I would think.
Here’s what she told the St. Louis Beacon:
“I’m angry at both the bank and the organization — Wells Fargo and NACA. Is the idea of ’scam’ in my mind? Yes. And that’s a quick turnaround for me. But, it was a very difficult 40-minute call I had with the bank — to see what I thought was a gift, of sorts, a break, just kind of disintegrate.”
NACA’s CEO is Bruce Marks, and he’s known for his outrageous acts in defiance of banks. I read about the guy and frankly, had to like him. For a while, he was delivering old, crummy furniture to the front lawns of bank executives on weekends. Pretty cool, right? Now I’m not so sure.
When Bruce was asked for numbers on how many St. Louis homeowners have received loan modifications and how many are in some sort of pending status, all he would say is that “it’s a rolling number”. It’s apparently a number that rolls. Bruce went on to say that that the focus would be on completing pending cases before the tour would resume in Los Angeles in late September. The “vast majority” will be completed by the end of this week, he told the St. Louis Beacon.
Were they? I don’t know. I can’t find any published numbers anywhere. I sure hope “the vast majority” of the 40,000 people that attended the NACA “Save the Dream” event… had their dream saved.
But I’m skeptical. Because when you consider that, according to the administration’s report cards that were published on August 9th, Bank of America only modified 4% of its eligible loans. Bank of America is the country’s largest mortgage holder, so it seems hard to imagine that the “vast majority” of 40,000 homeowners could save a dream out of that 4%. Maybe I’m not getting the math right.
At least NACA provides their housing counselor services FREE! That’s right, they don’t charge any of those distasteful up front fees everyone is so concerned about. Nope, NACA gets their money the old fashioned way… from the taxpayers… well, from the government who gets their money from the taxpayers. In fact, NACA recently got $16 million in government funding to provide housing counselors to distressed homeowners. But that’s not considered an up front fee, I suppose. So, you see… that’s free right there.
Oh, and one more thing… just for fun I looked up NACA on the Better Business Bureau Website and guess what? You guessed it… an ‘F’. Uh oh. So, maybe they are doing some loan modifications after all. Go figure.
NACA’s Save the Dream? Or just another government funded nightmare?
NACA's "Save the Dream" Tour
More tax dollars for the self-proclaimed Bank Terrorist
Despite receiving taxpayer money, NACA doesn’t provide public reports on either its loan-brokerage business or its campaign to modify mortgages. Jim Campen, an economics professor emeritus at the University of Massachusetts, Boston, says he tried in the 1990s to analyze the performance of loans arranged by NACA, but Mr. Marks refused to provide data.
Mr. Marks says he feared the data would be used by another nonprofit to discredit his group. NACA does provide information to lenders that work with it, he says, but sees no duty to disclose it to the public.
“He’s been very effective in shaking money out of the banks,” says Mr. Campen, but “he’s not one to open up his records to public scrutiny.” Wall Street Journal
Article dated * May 20, 2009
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Sources: NPR, Mandelman Matters, MSNBC, CNBC, Wall Street Journal, Michelle Malkin, NACA, Youtube, Google Maps
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