Loan Modification Programs Falling Short

Joelle Berni, a Century 21 M&M and Associates Realtor in Madera, was not surprised to hear this week that more than 40 percent of homeowners applying to the federal Home Affordable Modification Program drop out.

The HAMP program, the flagship of several federal loan modification plans, is designed to lower mortgage interest rates to counter high foreclosure rates.  The HAMP program had approximately 530,000 borrowers fall out from 1.3 million that enrolled since March 2009, according to the Treasury Department.

“I have been in some kind of mortgage modification since December 2008,” said Berni.  “They denied me initially.”

Berni was in need of financial relief after joining millions of other over-extended consumers.  In 2003, she purchased a four-bedroom, two-bath house.  As the value of the home grew, Berni refinanced to pull some cash out and to add a swimming pool.

As the housing boom ended and values nosedived, the mortgage balance on the 2,200-square-foot home ballooned.

Berni applied to the Making Home Affordable program, which allowed eligible homeowners to receive loan modifications with interest rates as low as 2 percent.

While in the MHA process, she was allowed to pay a “trial payment” with just 2 percent interest. However, Berni’s MHA application was ultimately denied and she only qualified for traditional loan modification, which only lowered her 6.5 percent interest rate to 5.75 percent.

Berni said she plans to appeal her situation and believes the MHA program lost some of her documentation, including portions of her income statement.

“They have my income wrong,” she said. “They’re just not getting their paperwork right.”

Cecelia Solorio-Smith, sales manager of the Century 21 M&M office in Oakdale, said it is common knowledge that the loan modification programs have been flooded with applications and lending institutions are overwhelmed and documents are lost.

“It’s important to put your loan number on all documents and take good notes.  Get the names of the people you talked to,” said Solorio-Smith.  “You’ve got to really put the package together exactly as they require and follow up.”

Homeowners not qualifying for a loan modification program can go into yet another federal program — the Home Affordable Foreclosure Alternatives program —which is designed to bypass a foreclosure with a short sale.

Jerilyn Von Flue, sales manager at Century 21 M&M in Madera, said her office’s success rate with loan modification programs is much less than the approximately 60 percent national rate.

“To be honest, we haven’t been very successful,” she said.  “They want to turn it around and make it a short sale.”

A short sale is when a property is sold for less than the balance owed on its loan.  Banks are willing to take the loss to avoid foreclosure, which results in hefty fees to the bank and a poor credit ranking for the homeowner.

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