Even as government officials prepare to unveil new standards this week for how banks treat millions of Americans facing foreclosure, housing advocates and homeowners are skeptical the rules will be able to do something past efforts have not: provide a beleaguered borrower with one individual to help them navigate the mortgage maze.
While the entire process of seeking a mortgage modification is complicated and time-consuming, few elements are as maddening as the inability to get through to a representative at the bank, or being asked for the same documents again and again.
So the promise of a single point of contact has emerged as a crucial element in the much-ballyhooed $26 billion settlement reached earlier this month involving state attorneys general, the federal government and the five biggest mortgage servicers. These rules will apply nationwide and come with commitments of strong enforcement by federal and state authorities, but they carry a familiar ring for those experienced in the foreclosure process.
Last April, the industry made many of the same pledges under a consent order with the Office of the Comptroller of the Currency and since then, consumer representatives say, there has been barely any improvement, adding that loan files continue to be handed off from one agent to another, sometimes weekly, and that even when a single person is assigned to their cases, one phone call after another goes unreturned.
“It doesn’t seem like much has changed,” said Josh Zinner, co-director of the Neighborhood Economic Development Advocacy Project, or Nedap, a resource and advocacy center that works with community groups in New York. “We’re still seeing the same systematic problems.”
Susan Hall, a homeowner in Cotati, California, who has been trying to modify the terms of her mortgage since October 2009, thought she was in luck last October when she got a letter informing her that a single person had been assigned to her case by her servicer, Bank of America. Within weeks, she got three more letters, all with different names as her ostensible point of contact. None of them proved able to help.
“I just keep getting passed from one person to another,” she said. To make matters worse, her house is now valued at less than her mortgage, putting her among the 10.7 million American mortgage holders who are so-called underwater borrowers. “Nobody is willing to talk to me.”
The architects of the new settlement say they are keenly aware of these complaints, and the secretary of the Department of Housing and Urban Development, Shaun Donovan, alluded to them when he announced the deal with Bank of America, JPMorgan Chase , Wells Fargo , Citigroup and Ally Financial on Feb. 9.
“No more lost paperwork, no more excuses, no more runaround,” he said. The new standards, he added, would “force the banks to clean up their acts.”
Besides improved servicing standards to be released in the next few days in Washington, the deal is also supposed to provide one million underwater borrowers with reductions in what they owe on their mortgages or the ability to refinance at lower rates. An additional 750,000 people who lost their homes to foreclosure from the beginning of 2008 to the end of 2011 are eligible to receive checks for up to roughly $2,000 each.
While most homeowner advocates welcome the new settlement, many are skeptical about whether the banks will actually change their behavior.
“There’s a lot I’ve seen over the past few years that makes me very wary,” said Lisa Sitkin, a lawyer with Housing and Economic Rights Advocates in Oakland, Calif. “Things fall through the cracks all the time. Our view is that the banks are still not doing what needs to be done.”
Despite last April’s settlement with the Office of the Comptroller of the Currency, for example, she said: “Things have improved only marginally. Every week, the banks come up with new ways to make borrowers’ lives incredibly difficult.”
Officials at the comptroller’s office insist that the banks have made considerable progress since the consent order was agreed to last spring, adding that the single point of contact and other improvements should be largely in effect by the end of 2012.
“We are satisfied they are moving in that direction,” said Bruce Krueger, lead mortgage expert at the comptroller’s office and a member of its large bank supervision team. “These are large companies with a lot of complicated processes. It’s not just about putting a Band-Aid on the issue, it’s about getting the issue right.”
In some cases lately, frustrated homeowners have had more success. From July of last year to January, Stacy Brown of Brentwood, Calif., said she had called her single point of contact at JPMorgan Chase 30 times and managed to get in touch only once. But after repeatedly calling the executive offices at JPMorgan and also filing complaints with regulators like the comptroller’s office and the Consumer Financial Protection Bureau, Brown managed to find another, more effective representative and was recently approved for a modification. “It’s a miracle,” she said. “She actually picks up the phone when I call.”
As for Hall, Bank of America officials say she was declined for a modification under the federal government’s HAMP mortgage modification program, but they are still reviewing her case and exploring other options that would still permit a modification or principal reduction.
Bank of America officials said that they began converting customers to the single point of contact system in the third quarter of last year, and that the conversion process was completed at the end of last month. JPMorgan Chase said it has reduced the backlog of customer complaints by 62 percent since they peaked last year.
Last year’s agreement with the comptroller’s office is not the only enforcement action that has been slow to pay dividends. Three and a half years after a landmark settlement to resolve complaints against subprime giant Countrywide Financial, the architects of that deal say they hope the servicing standards that will be unveiled this week in Washington will have more of an impact.
“The problems haven’t been rectified and borrowers continue to get the runaround,” said Terry Goddard, who until last year served as Arizona’s attorney general and was among the designers of the Countrywide settlement. “It was not successful, and I hope it’s a powerful lesson about what needs to be done in this agreement. Trust, but verify.”