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Loan Modification Profile: Fed Up, Giving Up, and Moving On

by Karen Weise ProPublica, Today, 8:53 a.m.

Download the audio.

Listen to Wallace Farmer talk about the loan mod process.

On a recent Friday morning, Wallace Farmer packed up and moved out of his Baltimore row house. After over a year of confusion and delays, JPMorgan Chase told Farmer that he made too much for a mortgage modification through the government’s foreclosure relief program. That made no sense to Farmer — he’d lost around $500 a month from two rental properties — but he was done fighting. He recalls finally saying, “To hell with it.”

Farmer is one of many homeowners who have given up on the government’s mortgage modification program, which tries to help struggling homeowners by reducing their monthly payments. They say they’re trapped in a bureaucratic nightmare, and even if they are offered a modification, it doesn’t help enough. They stop sending checks and instead face foreclosure.

Have you worked for a servicer in a loan modification call center?

“I have been traumatized,” says Farmer of his process trying to get help from Chase. “I couldn’t get any closure. Nobody would tell me anything. They kept saying, ‘It’s in the mail. It’s in the mail.’” Chase spokeswoman Christine Holevas says the bank was giving Farmer “assistance and advice about options” when he moved out.

Farmer’s frustration at the delays and the runaround are common among people trying to get help through the government program. More than three-quarters of the homeowners who responded to our questionnaire said they did not trust their servicers to make a good-faith effort to evaluate them for a modification. The Treasury Department has acknowledged that the stress and confusion of the process has caused some homeowners to give up.

Based on the accounts of more than 350 homeowners, University of Arizona law professor Brent White recently wrote that homeowners who make intentional decisions to stop paying their mortgages often feel “anxiety and hopelessness about their financial futures and anger at their lenders’ and the governments’ unwillingness to help.”

When these homeowners take a look at the hard numbers of their finances, many say a modification isn’t enough help. The delays can often push homeowners further into debt because unpaid principal, interest and fees accrue during trial modifications. And nationally, one in five homeowners, like Farmer, are “underwater,” meaning they owe more on their mortgages than their homes are worth. Farmer figured that, since he owes $101,000 more than the market value of his home, he’d essentially be renting for the next 20 years. “I cannot be burdened with that amount of negative equity,” he says.

Even those who successfully get permanent modifications end up owing 50 percent more, [PDF] on average, than their homes are worth, according to the Government Accountability Office.

The government program lowers monthly payments by reducing interest rates, extending the term of a mortgage, and then, if necessary, offering “principal forbearance,” which moves up to 30 percent of the amount owed to a balloon payment at the end of a loan. Around a third of permanent modifications in the program have principal forbearance [PDF].

In March, the Treasury Department announced a new program to promote not just postponing principal payments, but actually wiping away some debt for loans with balances more than 15 percent higher than the house’s value. Under the program, mortgage servicers are “encouraged” — but not required — to forgive principal.

After a year of faxing and resubmitting documents, one Florida homeowner finally threw up his hands and faxed his mortgage servicer a picture of his naked backside with a note saying, “Please see below for my updated financial information.” The homeowner says he got a modification the very next week.

ProPublica’s Paul Kiel and Olga Pierce contributed to this story.

Have you given up on getting a modification? Please use the comments section below to discuss with other homeowners. And if you haven’t already filled out our questionnaire, please tell us your story.

Loan Modification Profile: Fed Up, Giving Up, and Moving On by

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  • Valerie

    I started this process of modification over 3 years ago. I finally got a trial modification after 7 months of sending financials and resending financials because supposedly they had not receive or lost the documents. The trial modification was to be 3 months it took 9 months and I still had to update my financials,finally I got a call from Saxon Mortgage saying congratulations you have your modification and it was even $200.00 less than the trial amount. All I had to do was wait to have the underwriter finalize the paper work. Within that month I received a letter stating that my mortgage was sold to Ocwen. They said not to worry they would honor the Saxon process they AGAIN required my documentations and financials. 4 months later I was given amount that was $800.00 more, and my income had gone down they wanted me to pay 60% of my income to a mortgage payment. Talk about setting up someone to fail. I said I can’t pay that so they lowered it to 50% of my income. At that time, It felt like extortion Well I threw up my arms and I am walking away from my house. It is so stressful I cant function. I know alot of Americans are going through what Im going through. Locally, there are over 40,000 Washington homeowner going through the foreclosure process.

  • Valerie

    I started this process of modification over 3 years ago. I finally got a trial modification after 7 months of sending financials and resending financials because supposedly they had not receive or lost the documents. The trial modification was to be 3 months it took 9 months and I still had to update my financials,finally I got a call from Saxon Mortgage saying congratulations you have your modification and it was even $200.00 less than the trial amount. All I had to do was wait to have the underwriter finalize the paper work. Within that month I received a letter stating that my mortgage was sold to Ocwen. They said not to worry they would honor the Saxon process they AGAIN required my documentations and financials. 4 months later I was given amount that was $800.00 more, and my income had gone down they wanted me to pay 60% of my income to a mortgage payment. Talk about setting up someone to fail. I said I can’t pay that so they lowered it to 50% of my income. At that time, It felt like extortion Well I threw up my arms and I am walking away from my house. It is so stressful I cant function. I know alot of Americans are going through what Im going through. Locally, there are over 40,000 Washington homeowner going through the foreclosure process.

  • Thebunnie

    I got a loan mod on my condo with my mortgage company. The bank that financed our house told us to go screw ourselves when we were both laid off within 3 months of my son’s birth. So we moved into a 637 sq ft condo meant for 1 – 2 people at most and there are now 4 of us. I’d leave, but the payment is now lower than anything I can rent. And I just figured out the mortgage company actually rolled $40K into a “2nd mortgage” which is actually a balloon payment. So I owe $10K than the original loan. And I’m now a total of $90K upside down.

  • Thebunnie

    I got a loan mod on my condo with my mortgage company. The bank that financed our house told us to go screw ourselves when we were both laid off within 3 months of my son’s birth. So we moved into a 637 sq ft condo meant for 1 – 2 people at most and there are now 4 of us. I’d leave, but the payment is now lower than anything I can rent. And I just figured out the mortgage company actually rolled $40K into a “2nd mortgage” which is actually a balloon payment. So I owe $10K than the original loan. And I’m now a total of $90K upside down.

  • Steve Rhode

    Which option Do you feel allows you to resolve this situation and move forward faster towards a safer financial future?

  • Giving up

    We took out a 5 year interest only loan which expires in 6 months. We’ve fell behind about a year ago. Tried to modify with our lender but we didn’t qualify because, like Farmer, we make too much. Plus, now, we learned that our house is worth less than what we owe. So, that are suggesting a short sale. Our credit is already ruined because I turned my car in to the bank to help save our home. That was a year ago and don’t see things getting any better. So I ask myself, why should I do a short sale to help them recover the money. I should just let them foreclose on our home and file for bankruptcy. Let the bank find a new owner

  • Giving up

    We took out a 5 year interest only loan which expires in 6 months. We’ve fell behind about a year ago. Tried to modify with our lender but we didn’t qualify because, like Farmer, we make too much. Plus, now, we learned that our house is worth less than what we owe. So, that are suggesting a short sale. Our credit is already ruined because I turned my car in to the bank to help save our home. That was a year ago and don’t see things getting any better. So I ask myself, why should I do a short sale to help them recover the money. I should just let them foreclose on our home and file for bankruptcy. Let the bank find a new owner

    • http://GetOutOfDebt.org Steve Rhode

      Which option Do you feel allows you to resolve this situation and move forward faster towards a safer financial future?

  • http://www.debtmanagement.net Jane Sanders

    Who could have guessed that a government program would actually end up helping the major lenders and not the homeowners it was intended to? I’ve also read about the companies hired to run these programs using their powers to only modify mortgages in ways that they can profit from.

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