Slow Start to U.S. Plan for Modifying Mortgages
Help slow to arrive
About 15.4 million borrowers, 20 percent of single-family homeowners, are underwater, up from 13.6 million at the end of last year, according to Moody’s. Being underwater is one of the biggest indicators of default, experts said.
The administration tries to address the problems of the underwater homeowners through its Hope for Homeowners refinancing program. In its previous incarnation, the program was deemed a failure after it produced only about 50 new loans.
Under the new initiative, mortgage servicers are required to vet borrowers for Hope for Homeowners after they have qualified for a trial loan modification. If borrowers are qualified, they refinance into new loans through the Federal Housing Administration. Mortgage investors must accept a write-down on their investment and the government backs the new loan.
Despite the federal backing, lenders must also be willing to make the new loans, said Rod Dubitsky, a mortgage analyst at Credit Suisse.
Many homeowners, consumer advocates say, do not even know they are eligible for a modification. Others may think they are eligible, but have to navigate a maze of rules and bureaucracies.
Amy and Robert Darr, of Coshocton, Ohio, for instance, fell behind on their payments in October after Robert’s hours were cut; he is a maintenance worker at a foundry. They tried to catch up on their payments when they received their tax refund, but by that time the couple had received a foreclosure notice. They contacted their lender to see if they would qualify for a loan modification, and provided the lender with the required paperwork.
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But CitiMortgage refused to suspend the foreclosure proceedings. Citigroup declined to comment.
“Hopefully, we will qualify,” Mrs. Darr said, “because I don’t want to lose my home.”
The couple contacted Southeastern Ohio Legal Services, which filed a motion with the local court to suspend the foreclosure and is currently waiting for a response.
“The right hand doesn’t know what the left hand is doing,” said Melissa Benson, a staff lawyer with the legal services organization. “Most people who get foreclosure complaints don’t even know how to put up a fight at all. And they lose fairly quickly.”