Obama administration puts pressure on mortgage servicer to beef up loan modification process
The government wants to ”light a fire” under lending institutions to speed up the process of transitioning homeowners with trial loan modifications to permanent status. The Home Affordable Modification Program (HAMP) has assisted more than 650,000 homeowners with loan modifications. However, a little more than half of those struggling homeowners are set to convert to permanent loan modifications before the end of 2009.
Both the Treasury and the Department of Housing and Urban Development (HUD) will “implement new outreach tools and borrower resources” to help speed up the conversion process.
Phyllis Caldwell, chief of the Treasury’s Homeownership Preservation Office, said the administration was revamping its effort “to ensure that borrowers and servicers know what their responsibilities are in converting trial modifications to permanent ones.” The Treasury will be reporting information on the number of permanent modifications by lending institutions for public scrutiny.
Presently, lenders who lower mortgage payments collect $1,000 from the government, with another $1,000 per year for up to 3 years. However, mortgage companies can collect larger fees from investors who own the mortgages and often increase those fees the longer the struggling homeowner remains delinquent.
The reason the time of trial modification seems to be lengthened is that paperwork submitted by the borrowers requesting permanent modification status too often ”gets lost,” leaving the borrower to resubmit documents. Lawyers assisting these homeowners view this as a stall tactic on the part of the servicers.
Florida lawyer Margery Golant said, “I don’t think they (servicers) ever intended to do permanent loan modifications. It’s a shell game that they’re playing.”
Mortgage Modification Conversion Drive is explained in detail on the U.S. Department of the Treasury website.