They say it has to get worse before it can get any better. But people are wondering when the tide is going to turn. Families all over the country are still suffering from a previous destructive presidential administration; we won’t name any names, but you know who we’re talking about.
Middle class Americans are rapidly being wiped out by everything from joblessness to foreclosure. Even with the President Obama’s stimulus bill, homeowners are still being driven away from their personal sanctuaries, left to give up their American dream, and live from paycheck to paycheck.
According to RealtyTrac.com, in June 2010, one in every 411 homes nationwide received foreclosure notices and so far, California ranks fourth with the most foreclosures. One in every 194 homes in the state falls to the same fate.

President Obama recently introduced the Home Affordable Modification Program (HAMP) which is supposed to bring down the foreclosure rates by requiring banks to assist struggling homeowners.

The U.S. Treasury Department says that as of January of this year, nearly 1.3 million borrowers nationwide have received offers for trial modifications and more than 940,000 are currently in active modifications, with 116,000 being permanent. The numbers have steadily increased since the government stepped in, however, the increase does not seem to be keeping up with the number of families that fall into foreclosure each year.

According to the Mortgage Bankers Association, every three months, 250,000 new families enter into foreclosure.

The other side to this story is that, many who have applied for a loan modification and are probably qualified are still going into foreclosure as they sit waiting to be approved.
The extended time homeowners sit and wait for a response for their loan modification applications from a bank has been a cause of hundreds of foreclosures lately.

Homeowners, accusing the institutions of not doing their jobs, have fiercely criticized Bank of America and several other major players like Chase Bank, CitiMortgage, IndyMac, and Wells Fargo for their poor response time and lack of effort.

Those pesky banks

In April, Hagens Berman Law Firm filed a class-action suit against BofA, claiming that the institution purposely slows or obstructs California homeowners who have applied for HAMP benefits by simply ignoring requests for loan adjustments.

“Rather than all allocating adequate resources and working diligently to reduce the number of loans in danger of default by establishing permanent modifications, Bank of America has serially strung out, delayed, and otherwise hindered the modification processes that it contractually undertook to facilitate, when it accepted billions ($25 billion) from the United States (government),” the suit states. “By failing to live up to its obligations under the terms of the agreement it entered into with the Department of Treasury, and the terms of the contracts it formed with individual homeowners, Bank of America has left thousands of borrowers in a state of limbo–often worse off than they were before they sought a modification from Bank of America.”
The U.S. Treasury Department reports that BofA services more than 1 million mortgages that qualify for financial relief, but have granted only 12,761 of them permanent modification. As of January 2010, B of A has a 22 percent modification rate, which is actually an improvement since the end of last year.

However, the institution ranks one of the lowest in the country to approve applications (Wachovia is the lowest on a selective list of HAMP servicers with a rate of 3 percent. CitiMoartgage is the highest with 50 percent).

“We intend to show that Bank of America is acting contrary to the intent and spirit of the TARP (Troubled Assets Relief Program) program, and is doing so out of financial self interest,” Steve Berman, managing partner of Hagens Berman, said in a statement. “We contend that Bank of America has made an affirmative decision to slow the loan modification process for reasons that are solely in the bank’s financial interests.”

Named plaintiff Britta Brewer, like many going through the loan modification process, was foreclosed on after BofA mishandled her case, allegedly on purpose.

Brewer filed for a loan modification when she and her husband’s income changed and house payments increased, making it difficult to pay their mortgage on time.

In August of 2009, her lender confirmed that they received her request for assistance via e-mail and letter.

But in September, a realtor approached Brewer, offering to buy her home as part of a short sale because their home was in default. She promptly contacted BofA’s foreclosure department, who claimed they did not receive her financial documents. However, the company confirmed that a modification process had been started. The bank’s representative Brewer communicated with restarted the loan modification process as a result of the confusion. The next day, the struggling homeowner faxed over the necessary documents.

On October 1, she received a foreclosure notice on her door. She spoke to another representative who said her temporary loan modification was approved and instructed Brewer to make three consecutive, timely payments of $1,977. She did so, but at the end of the three-month period, the bank demanded an immediate payment of $46,000 and claimed that she was not eligible to receive a permanent loan modification.

As a result, her home went into foreclosure.

BofA was contacted for this story, but refused to comment on the pending litigation. However, Rick Simon, spokesperson for BofA’s home loans department wrote the following statement:
“Since early last year, Bank of America has made the government’s Home Affordable Modification Program (HAMP) the centerpiece of its homeownership retention efforts and considers homeowners with eligible loans for a HAMP modification before looking at other alternatives. For homeowners who do not qualify for HAMP or who fall out of the program, the bank may offer alternative solutions.

“Bank of America has completed more than 650,000 mortgage modifications since the start of 2008 through HAMP and proprietary modification programs and offers. In the first half of 2010, we completed more than 160,000 modifications, including more than 72,000 HAMP modifications, 24 percent more HAMP modifications than any other servicer. Bank of America also leads the industry with more than 310,000 trial modifications started under the HAMP.”
Lori Gay, president and CEO of Los Angeles Neighborhood Housing Services (LA NHS) says Brewer’s case is nearly identical to that of her own clients. Some of the greatest challenges borrowers are having are the poor or slow response from lenders. She said some lenders even lose paperwork, or make unaffordable loan modification adjustments.

What is HAMP?

In March of 2009, HAMP was established using funds from TARP (former President George W. Bush signed a bill into law which designated $700 billion for Troubled Assets Relief Program aka TARP to purchase failing bank assets). Through the program, the TARP lenders are required to participate in HAMP, however for non-TARP servicers, the program is voluntary.

HAMP is designed to help as many as four million eligible, financially struggling homeowners avoid foreclosure by modifying their loans to a level that is affordable and manageable by 2010.
“The HAMP program provides a standardized and streamlined approach to loan modifications nationwide. Affordability is assessed at whether eligible homeowners can assume paying no more than 31 percent of their gross income on their mortgage,” Gay explained. “Now, there are also amendments which allow for principal reductions, expedited short sales, deed in lieu and/or trial modification responses so that homeowners aren’t left dangling for months waiting for an answer.”

But there are benefits for lenders, so one would think banks would speed up the process. Every approved HAMP application means lenders receive $1,000. Along with that, after three years of consistent, on-time payments made by borrowers, $1,000 goes back to the institution for each year. Additionally, borrowers who fulfill their obligations also receive cash–$1,000 per year for up to five years.

According to www.hmpadmin.com, a HAMP website administered by Fannie Mae, in order to be qualified for benefits, homeowners must fit the following criteria: The borrower is delinquent on his or her mortgage or faces imminent risk of default; the property is occupied as borrower’s primary residence; mortgage was originated on or before Jan. 1, 2009 and the unpaid principal balance must be no greater than $729,750 for one-unit properties. Once a homeowner has been qualified, the servicer will adjust payments to 31 percent of a borrower’s monthly income.

TARP regulations say banks must gather information from the homeowner, and offer a revised three-month trial payment plan for the borrower. If the homeowner makes all three payments under the trial plan, and provides the necessary documentation, the lender is required to offer a permanent modification.

Despite the relief HAMP seems to provide, critics are skeptical about the accountability portion of the plan.

Just as Bank of America is currently being sued, other institutions that have been under fire about delaying the loan modification process and not doing their best to stop foreclosure. It is up to the borrowers to really hold institutions responsible.

A contributor on loansafe.org says, “As part of receiving TARP funds, the servicers had to sign participation agreements. But if they violate them what is the remedy? The Treasury can sue the servicers for breech of contract. But the department would have to prove damages to Treasury, which is impossible. Mortgage borrowers are not a party to the contracts and have no standing. For any enforcement by Congress would have to step in with new laws.”

Get me out of this thing

It may seem like the end of the world, when a crisis like this hits a family, but there is help out there.

Gay’s non-profit organization LA NHS, located in the heart of Los Angeles, is dedicated to helping struggling homeowners get out of foreclosure and to helping families rebuild their lives. With an aggressive approach, LA NHS is that middle man who bugs the lender about your application when you can’t.

“Our agency and coalition members help by expediting files, consistently bugging the lender, and making sure the appropriate paperwork is sent to and received by the lender with the right story for the right borrower,” Gay explained.

LA NHS works with HUD counselors to present solutions to their clients, such as refinance, loan modifications, short sale, forbearance agreement, or relocation assistance.

On Saturday, August 7 at Long Beach Polytechnic High School, LA NHS will be offering foreclosure prevention workshops, as well as homebuyer information at the Help & Hope Fair. It begins at 9 a.m. and will end at 2 p.m. Parking and admission is free.

Those needing foreclosure prevention services are asked to bring the following: Income documentation–two current pay stubs, two most recent W-2s, if self employed–four months of most recent bank statements and two most recent quarterly income statements; most recent mortgage statement and any related correspondence; two most recent tax returns; and a list of monthly expenses.

More information is available on their website at www.lanhs.org or by calling (888) 895-2647.
Other solutions include the Home Affordable Foreclosure Alternatives (HAFA) Program, a government incentive program for homeowners, who do not qualify for a trial mortgage modification, do not successfully complete the trial period for their modification, miss at least two consecutive payments during their modification period, or request a short sale or deed-in-lieu of foreclosure. More information is available at www. makinghomeaffordable.gov.