Everett, Wash.
Published: Sunday, July 5, 2009

Mortgage relief slow in coming for strapped homeowners

By Amy Rolph
Herald Writer

 Deanna Skinner lives in her dream house in east Everett. But when she and her husband divorced last year, they knew they'd have to sell -- and at a time when the real estate market was crumbling.

When the Obama administration announced its affordable refinance program earlier this year, Skinner was inspired, thinking she'd found a way to keep her home through refinancing or loan modification.

She applied for modification in March through JP Morgan Chase, formerly Washington Mutual. But almost four months later, she's in limbo, unsure even if her application is open or closed.

"I can't get a clear answer," Skinner said. "I literally have called about seven different times, and I get a different answer every time. I mean, it feels like a conspiracy."

Skinner isn't the only homeowner frustrated with the mixed signals from the federal government and from banks. Despite an ambitious plan from the Obama administration, Americans aren't expected to refinance their homes at the high rates predicted earlier this year.

After launching the plan in February, the Obama administration estimated its refinance and modification programs could help as many as 9 million homeowners reduce their monthly mortgage payments. The program also intends to offer help to about 5 million homeowners whose loans are owned or guaranteed by government-owned Fannie Mae and Freddie Mac, and earmarks $75 billion to prevent "avoidable foreclosure."

So far, about 200,000 borrowers have received offers for trial loan modifications, according to the U.S. Department of Housing and Urban Development.

But last week, the Mortgage Bankers Association said government expectations are unrealistic, estimating that lenders will make about $2.03 trillion from mortgages in 2009 -- about $750 billion shy of the association's forecast from earlier this year.

The organization's economists cite the recent rise in interest rates that cut government efforts off at the knees just as they got under way.

That means smaller loans and more all-cash transactions, banker association officials said.

In response to the stagnant market, the federal government changed its qualification standards last week to help more people. Now, the refinance program serves homeowners whose mortgages are up to 125 percent of the value of their homes instead of 105 percent, meaning it can help people more deeply in debt.

But even with added efforts, bank customers lament an increasingly frustrating application process that can take months, then leave them out in the cold without a satisfying explanation.

For Skinner, the past few months have been filled with conflicting reports from Chase employees, but only after she called several times.

She said she was told certain documents weren't received, even after she resubmitted those papers. Other bank representatives said her application was closed, and another said someone else submitted changes to her application.

When Skinner called the bank in April, she heard her application was referred to the loan processing department and that she would hear back in a week. She hasn't received any phone calls from the bank since then, although she's called several times.

"I cried for two hours one night because I just don't even know what to do," Skinner said. "It's the most helpless feeling -- when no one can help you."

Chase officials announced last week the bank has approved 138,000 trial mortgage modifications since April 6, when they started processing trial modifications through Obama's program. More than 87,000 modifications were approved under the Making Home Affordable program, and almost 51,000 were approved through Chase's own modification program -- geared toward homeowners who don't qualify under the federal guidelines.

"We have made terrific progress since April 6 in helping families with trial modifications by ramping up our capacity through hiring people, adding office space and investing in technology," said Charlie Scharf, head of retail financial services for the bank. "We also clearly understand that many more families are anxious about their homes and need to hear from us as quickly as possible. We are committed to do whatever is necessary to help homeowners who qualify for these programs."

Any frustration homeowners experience doesn't seem limited to one bank. Dana Strickland, a support worker with the Everett School District, tried to help a Vietnamese American family secure a loan modification through the Bank of America earlier this year, only to be met with repeated denial.

The non-English-speaking family was told they didn't qualify because they hadn't missed a mortgage payment. But Strickland, who spoke to the bank on behalf of the family, said that was because they had amassed $30,000 in credit-card debt. The family's landscaping business was hit hard by the recession, she said.

"It sounds like it's this dance," she said. "If you're current, we don't want to help you. But if you miss three months, they can start foreclosure on you."

Strickland is worried that other families in need will be denied refinancing, too: "They're giving people false hope."



Read Amy Rolph's small-business blog at www.heraldnet.com/TheStorefront. Contact her at 425-339-3029 or arolph@heraldnet.com.
© 2009The Daily Herald Co., Everett, WA