“She had run into financial difficulty (paying her mortgage) after separating from her husband and owed nearly $300,000 on her home, which was valued at less than $200,000, she said.”, Wall Street Journal, July 30, 2014
“Let’s all understand, the fact that this homeowner’s mortgage exceeds her current home’s value has nothing to do with whether or not she has the income sufficient to continue to make her monthly mortgage payment. Nor does it for anyone else either. And the fact that she has a personal matter that has affected her family’s income and ability to pay her mortgage is NOT the mortgage lender’s fault or responsibility. My general recollection is that roughly 5% of American homeowners with mortgages experience a death, divorce, illness/health issue, job loss or other personal matter each year that affect their ability to pay their mortgage. In normal times, as a result of regularly rising nominal home prices (assisted by the Fed’s monetary inflation goals), many solved this problem on their own by selling their homes and paying off their mortgage in full (or borrowing against their home equity, hoping their finances would turn around before being forced to sell…you can’t do this today, with the CFPB’s ability to pay rules). It is only during this time (a massive housing bubble bursting), where these homeowners can’t solve this problem on their own (by selling their home or temporarily drawing on their home equity). Their inability to pay their mortgage is (mostly) not their fault and it’s also (mostly) not their mortgage lenders fault either. (See related blog Statement #199 on May 20, 2014 for a partial solution.)”, Mike Perry, former Chairman and CEO, IndyMac Bank
Homeowner Program Faces Mounting Application Backlog
Mortgage Companies Processing HAMP Applications Can’t Keep Up With Demand, Watchdog’s Report Finds
July 30, 2014 12:01 a.m. ET
The Obama administration’s signature program to aid struggling homeowners has hit another speed bump: The mortgage companies processing applications can’t keep up with demand.
More than 221,000 applications to the Home Affordable Modification Program were waiting to be processed by mortgage servicers at the end of May, according to a government report scheduled for release Wednesday. That is up from a backlog of 133,649 unprocessed applications at the end of November.
The report, prepared for Congress by the special inspector general for the Troubled Asset Relief Program, a watchdog within the Treasury Department, said at the recent rate, the number of unprocessed applications will grow by more than 27,000 a month.
“We’re very concerned about this. Homeowners should not have to wait six months, 10 months or more than a year to get a decision,” said Christy Romero, the TARP special inspector general. “The problem of delays is real and could have a disastrous impact on homeowners who are not able to keep up with their payments during this delay and lose their homes.”
Treasury officials say the mounting backlog may be partly due to changes made this year by the Consumer Financial Protection Bureau that require servicers to consider other options for homeowners as they process a HAMP application. Before, a servicer might consider a HAMP application without looking into other options.
Timothy Bowler, Treasury acting assistant secretary for financial stability, said even if some applications take longer to process due to the CFPB rules, in the end, more homeowners could get help. He said that while the department isn’t pleased with the backlog, if the outcomes are better for homeowners, that is the ultimate goal.
“Treasury remains committed to maintaining the standards HAMP has set while the industry implements new servicing regulations so that those households facing a hardship receive the best and most timely outcome,” Mr. Bowler said in a statement.
The growing backlog is the latest challenge for HAMP, which seeks to reduce monthly payments for borrowers by extending loan terms, lowering interest rates and reducing principal. Since the program was unveiled by the Obama administration in 2009, it has had some setbacks, including criticism that banks and mortgage servicers weren’t adequately prepared to handle the high volume of modification requests, and that the program required too much paperwork.
Still, as of June, more than 1.3 million borrowers have gotten help through the program, the Treasury Department said, while the loans of many others were modified through banks’ own programs using the HAMP model. The program was set to expire at the end of 2015, but in June the administration said it would extend the deadline “at least another year.”
Of the 10 mortgage-servicing companies mentioned in the TARP inspector-general report, Ocwen Loan Servicing LLC had the biggest backlog, with 60,812 unprocessed HAMP applications at the end of May. Ocwen also receives by far more applications than any servicer, with more than 30,630 received monthly between December and May, according to the report. The speed with which it processes applications was faster than many other servicers.
An Ocwen spokeswoman, who didn’t see the report before publication, said in a statement, “We are committed to maintaining best practices in mortgage servicing and keeping homeowners in their homes, while also preserving value for [mortgage-backed-security] investors.”
Mortgage companies have been investigated for failing to process applications. This month, SunTrust Banks Inc. agreed to pay as much as $320 million to end a criminal investigation into its treatment of HAMP applicants. In that investigation, the TARP inspector general said that SunTrust stored so many unopened applications in a room that the floor buckled under their weight. SunTrust acknowledged the issues highlighted by the government but didn’t admit to liability, a spokeswoman said at the time. Ms. Romero said that Wednesday’s report doesn’t imply any legal violations.
The inspector-general report is a reminder that while foreclosures have declined sharply over the past year, hundreds of thousands of mortgages remain delinquent or in some form of foreclosure—and many of the households involved are seeking some type of mortgage relief.
Gloria Mora of Miami said that she applied to HAMP in September 2012 through her mortgage-servicing company, Nationstar Mortgage LLC. She had run into financial difficulty after separating from her husband and owed nearly $300,000 on her home, which was valued at less than $200,000, she said.
Ms. Mora, 42 years old, said Nationstar repeatedly asked her to send documents that she had already submitted and didn’t get back to her with a final decision—a rejection—until August 2013. “They kept saying, ‘Send me more documents,’ when they were the same documents I had already sent,” she said. She said she is still making mortgage payments but is facing bankruptcy.
A spokesman said Nationstar required more documents to verify Ms. Mora’s income and some of her earlier documents expired during the application process, requiring her to refile them. Nationstar was one of a handful of servicers cited by the inspector-general report as having processed more applications in the six months through May than it received in the period.
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