(NY Times) Billions To Fight Foreclosure, But Few New Loans
They milled about the hallways of the cavernous State Supreme Court building in Jamaica, Queens — 42 homeowners whispering, studying old bills, waiting for a court officer to call their names and wave them, one by one, through a door.
There, in a dusty, high-ceilinged room with a steam radiator that never stopped wheezing, they took a seat across a table from a lawyer for a mortgage company. Then their work began: trying to persuade a stranger not to foreclose on their home.
The Obama administration’s plan to rescue Americans from foreclosure plays out day after day in rooms like this. On this day, as on most, nothing happened. One lawyer, visibly bored, put in a brief, token appearance. A few others seemed barely familiar with their cases. Another asked for more records, hinting that maybe next month the lender might talk about a settlement.
Ismail Ali, a silver-haired immigrant from Guyana, hoped to save his home in Ozone Park. “If it takes you another three months to evaluate me, and I keep paying, will I get a new mortgage?” he asked, almost pleading.
The lawyer shrugged, not unsympathetically. “I can’t answer that for you,” he said.
Ten months ago President Obama announced a $75 billion program to keep as many as four million Americans in their homes by persuading banks to renegotiate their mortgages. Lenders have accepted more than one million applications and cut three-month trial deals with 759,000 homeowners. But they have converted just 31,000 of those to the permanent new mortgages that are the plan’s goal.
In New York City, where 20,000 homeowners faced foreclosure this year, a recent study by the Center for NYC Neighborhoods found that lenders have offered new or trial mortgages to just 3 percent of the homeowners who have sought help.
Big mortgage companies — servicers, in the parlance of the industry — stand at the heart of this program. Many of the servicers that have agreed to participate are subsidiaries of the nation’s largest banks — Wells Fargo, Bank of America and JPMorgan Chase.
They say their performance is improving. “We ourselves stated that we fell short of our customer service goals,” said Mary Coffin, executive vice president for loan servicing at Wells Fargo. “Now we are doing three modifications for every foreclosure.”
But a drove of critics, including homeowners, nonprofit loan counselors, legal services lawyers and court officials, say these companies are also at the heart of the problem. Servicers, they say, pile delay upon delay, and too often steer homeowners into new mortgages with onerous terms. Some companies have insisted that homeowners waive their right to sue before getting a new mortgage, even though the Obama plan prohibits such demands.
Administration officials have vowed to shame servicers into action. And New York State lawmakers, like their counterparts in a few other states and cities, have tried to slow the headlong hurtle toward foreclosure by requiring lenders to negotiate with troubled borrowers in court.
Leonard N. Florio, a court-appointed referee, oversees such sessions in that dusty room in Queens. He is a chatty man and punctilious about not taking sides. But as he watched Mr. Ali, the Ozone Park homeowner, load his piles of bills and receipts back into his shopping bags, he could not help noting a pattern.
“I have yet to see an attorney for a servicer cut a deal,” he said. “Update this, update that. I mean, what’s the holdup?”
Loan servicers argue that homeowners are as often to blame: Many cannot show proof of income, and fail to make payments even on modified mortgages. And millions are in bigger trouble than the public realizes, burdened with monthly payments so exorbitant that even a reduced mortgage payment will not save their home.
The servicing companies make money either way. The Obama program pays them $1,000 for each loan modified, and another $1,000 per year for three more years if the borrower avoids foreclosure. On the other hand, the companies make large sums charging late and legal fees on overdue mortgage payments, and sometimes it is cheaper to foreclose than to cut the mortgage payment.
These same companies turned billions of dollars in profits during the fat years of the bubble. Four years ago, lenders strung banners from storefronts in Jamaica and Cypress Hills and Bedford-Stuyvesant, promising “You will not be turned down!” A no-documents-needed mortgage was easily obtained, often accompanied by the flimsiest of appraisals.
Now the lenders toss up daunting hurdles. Homeowners say they send and resend thick piles of documentation, only to be told that their papers have been misplaced, or that their pay stubs are out of date. Housing counselors dial a dozen times just to get a servicer on the phone.
“It’s a constant Catch-22: They never give you their name,” said Gerald Carter, a counselor with the Parodneck Foundation in New York City, which receives city and state money to advise homeowners. “You call back and say, ‘No, I was talking to Bob last time,’ but Bob wouldn’t give his last name — not even an employee ID number. So you start over.”
Last month, the Legal Aid Society of New York sued the federal government and a mortgage servicer, Aurora Loan Services, on behalf of four Queens homeowners. Aurora, which has a $116 billion loan portfolio, was a subsidiary of Lehman Brothers before that firm went bankrupt; it offered loans with interest rates just a bit lower than subprime rates, which are typically a few percentage points higher than rates on conventional mortgages.
The lawsuit charges that Aurora, and by implication many other servicers, systematically denied homeowners access to the federal rescue program. And, the lawsuit asserts, the Obama plan provides far too few safeguards for homeowners.
“The servicers ignore their obligations, and are throwing unaffordable agreements at people and setting them up for another default,” said Oda Friedheim, a staff lawyer with the Legal Aid Society.
Asked to respond, an Aurora spokeswoman e-mailed a statement saying the company tries to prevent foreclosure for its customers.
Tom Vellucci, 54, is one of the four plaintiffs in the lawsuit, and a soldier in this army of the potentially dispossessed. Once a maintenance man for an insurance company, with a modest home in Floral Park, Queens, he lost his health and then his job. When a tenant stopped paying rent, he fell behind on his mortgage. A so-called rescue firm offered to negotiate better terms and wheedled Mr. Vellucci and his wife, Maria, out of $8,000 in fees.
When the inevitable foreclosure notice arrived in March, the Velluccis called Aurora Loan Services and asked for a break. The company, he said, responded by piling on legal fees and giving them a four-month trial agreement that did not reduce their monthly payment.
The Velluccis say they drained their savings making payments. Then the couple asked Aurora if they could revise their mortgage terms under the Obama rescue plan. They say the company refused, saying their mortgage was not eligible because it was owned by investors.
Aurora makes a similar statement about investor-owned mortgages on its Web site. These claims are not true. The Obama program requires companies to make an effort to modify such mortgages.
Sitting on a bench in the Queens courthouse, where he has become a regular, Mr. Vellucci ran his fingers through thick black hair and shook his head. “We kept trying to pay on faith, all faith, so we could prove we were honest people,” he said. “Now all we look like is stupid.”
Phyllis Caldwell, chief of the Treasury Department’s Home Ownership Preservation Office, is not inclined toward tough talk about servicers, perhaps because the Obama plan, which she oversees, lacks enforcement teeth. Asked about Aurora’s refusal to consider modifying investor-owned mortgages, she suggested a reporter call the program’s compliance unit.
“If it is reported in The New York Times and someone chooses to audit it, that’s important,” she said.
She sees a brighter day coming. “We are holding the servicers accountable to report to us,” she said. “They are being much more transparent.”
For now, however, the Velluccis and thousands like them dangle perilously close to calamity.
Born in Italy, Mr. Vellucci and his wife migrated here as teenagers. They raised children, bought a house, lived their dream in Technicolor. Then his kidney gave out and their economic slide began. After court on this day, he would go for dialysis. The couple hope the lawsuit might give them one more shot at the Obama plan.
“I don’t sleep at night, I don’t sleep at all,” he said, rising slowly. “I tell Maria, ‘If we lose the house, I want to stop my dialysis.’ I want to die, honestly.”
Are Obama's & NACA Mortgage Relief Programs Scams?
Despite Millions of struggling American Homeowners seeking Gov't assistance to remain in their residences via Loan Modifications/ Loan Restructures from Pres. Obama's Making Homes Affordable (HAMP) or NACA's "Save the Dream" Tour, only about 4% (31,000 homeowners) applicants were approved.
This is absolutely unreal and totally unacceptable!
Something is most definitely wrong with this picture!
So Pres. Obama and NACA's programs are basically ineffective?
I've included NACA in this blog post because NACA employees use Pres. Obama's HAMP program Debt Ratio formula when assisting homeowners during "Save the Dream" tours.
4%?? Only 31,000 people??
According to several news reports (listed below) Banks are blaming the low number of approved Loan Modification/ Loan Restructure applications on lost paperwork.
What kind of lame excuse is that?
Where are the billions of dollars Pres. Obama and Congress allocated for Foreclosure Prevention earlier this year?
Better yet why won't NACA CEO Bruce Marks open his books to show real numbers of long term, proven success rates from his program to Congressional members?
Why is it ACORN CEO Bertha Lewis was the ONLY Federally Funded Housing program official required to open her organization's books to Congress?
Could it possibly be that Obama's HAMP program was perhaps intentionally set up to only approve a very small number of Loan Modifications in order to help banks stay profitable?
Doesn't this sound like something Tim Geithner might do?
No offense but for some reason I don't trust Tim Geithner. (Sorry Tim)
Could it be that participating Banks and NACA's CEO Bruce Marks are being paid by H.U.D. and Congress for each Submitted Application versus each APPROVED Loan Modification/ Loan Restructure application? (Permanent Loan Mods)
OMG! Isn't that considered a Scam??
When assisting Homeowners do NACA employees ensure all required, up to date paperwork is included with each Loan Modification/ Loan Restructure application?
So in essence it really doesn't matter to NACA or Pres. Obama's HAMP Program Administrators if Loan Mod applicants are approved for Long Term results or not, because Banks and NACA will be paid regardless.
Seems as if NACA's CEO Bruce Marks may have secret ties to Wall Street despite his claims of being a radical "Bank Terrorist".
Thus I'll ask this question again:
Why is it Congress jumped so quickly to deny funds for ACORN's Housing program unless CEO Bertha Lewis could prove her program was successful (by opening her books) but NACA's Bruce Marks can still receive Federal & State Funds without doing so?
Something is definitely wrong with this picture don't you think?
Again I'm speaking of Long Term or Permanent results, NOT 90-day trial periods.
Also due to the Recession millions of Homeowners are now living in "Underwater Homes", which means Property Tax values on those homes have dropped significantly.
When banks are processing Loan Modification applications, do they take that factor into consideration?
If so the Escrow on those loans should be reduced as well correct?
However in regions like Charlotte-Mecklenburg City & County officials have chosen to INCREASE Property Tax values on thousands of Underwater Homes.
Of course most of the residents living in those Underwater Homes are Middle Class & Low Income Minority Citizens.
What's the purpose of approving Homeowners for a Loan Modification/ Loan Restructure without including the decreased Tax Value on residential properties?
Considering the current Economic Recession our country is experiencing, why are City and County Officials Nationwide choosing NOT to lower Property Tax Values on homes, especially homes located in Middle and Low Income Communities as a best practice for their struggling Constituents?
Hmmm. This is certainly something to think about and inquiring minds want to know.
I propose that Congress should call Tim Geithner and Bruce Marks to Capitol Hill for inquiries about the operations of these two weak Foreclosure Prevention programs.
Immediately afterward Congress needs to than launch thorough investigations into Pres. Obama's HAMP and NACA's so-called "Mortgage Relief" programs.
Investigate as in requesting Pres. Obama's HAMP program officials & NACA CEO Bruce Marks to provide clear evidence and proof each program (since inception) has successfully helped at least close to 1 Million (combined) Homeowners versus just a paltry 31,000.
Don't you agree?
After all both programs are being funded with Taxpayer money just like ACORN was.
Only 4% (31,000 people) approved for Long Term results Indeed!
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: NY Times, Wall Street Journal, Michelle Malkin, NACA, Youtube, Google Maps
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