I found an interesting article on ConsumerAffairs.com entitled Do Loan Servicers Really Prefer Foreclosures?. It’s a little clickbaity, but apparently recent studies show that while mortgage companies make a big show of wanting to help homeowners avoid foreclosures, their actions indicate quite the opposite.
This has certainly been our experience over the past month, as Tony and I have been attempting to modify our own mortgage. “Get in touch with us,” they said. “We are committed to helping keep people in their homes. The most important step you can take is to reach out for help today.” So we’ve been reaching out, repeatedly, via our lender’s website and by phone, and all we’ve gotten in return is frustration. The last time we talked to them we were told that we didn’t qualify for the HASP modification program, but they didn’t say why. They recommended we apply for a their “Customer Hardship Assistance Package” instead, and said we should call every week to check on the status — but that it would be 30-45 business days (i.e. more than two calendar months) just for our case to be assigned to anyone.
So, we went through the online application process again, entering all the same information we provided before. Now when I log into my online account, the status message says “We’re here to help and need your remaining financial information to review your mortgage situation. Finish your Refinance request today!” Is “Customer Hardship Assistance” another term for refinance? Of course, there is no mention of how one “finishes” a refinance request. Apparently we are not alone.
In the last year ConsumerAffairs.com has received hundreds of complaints from consumers who said they followed loan-modification instructions, faxing requested documents repeatedly, only to have their applications disappear into a black hole.
I understand that mortgage lenders are completely backlogged at the moment, but now I suspect there is more to it than that. While it makes logical sense that lenders would try to avoid foreclosures – they are expensive for everyone involved – they are simply not motivated to modify the loans in ways that cut back on their profits. Modifications that benefit the lenders the most, such as loan extensions and forbearance (which are accompanied by steep fees and additional interest), are relatively simple to obtain. Modifications that are most likely to help homeowners – principal reduction, deeds-in-lieu, or interest rate cuts – are almost impossible to get approved because the lenders lose money on them. Banks lose money on foreclosures too, but over the long term they can recover and/or write off some of those losses.
Regardless of the loan servicer, the story seems to be the same. Consumers start down a road they think will lead to a modified mortgage, only to meet a wall of incompetence and indifference at the mortgage company.
Mortgage lenders, like any other business, exist to make a profit. They don’t care about the impact on families and communities because they don’t have to. However, these lenders have been bailed out by the same families they apparently can’t be bothered to help, so you’d think they would want to repay the favor in some way – if nothing else, just for the good PR. Even hiring additional, more professional staff to take care of the backlog in a timely fashion would be a step in the right direction, but they aren’t doing that either.
According to this article, another issue I hadn’t considered is that there’s no oversight. So not only do lenders have no motivation to help their customers avoid foreclosure, there’s no slap on the wrist if they don’t. The result is that homeowners like us are beginning to feel like they’ve been set up by the banks and the government, probably in collusion.