The NYT reports on how cumbersome and difficult it is for a homeowners — even with someone working on their behalf — to talk to their bank about getting a loan modification.
Pulling teeth is not an apt comparison. A better one might be: dealing with a health insurance company.
In some cases, it’s just a matter of dealing with bank bureaucracy and call centre workers that have almost zero training, motivation or customer service skills.
In another office down the hall, Ramin Lavi, 27, has picked up the file of Alice Descovich, who is seeking to shave down the $708,000 she owes on a mortgage serviced by WaMu for her home in Alameda, Calif. As the interest rates reset in coming months, it will become even harder for her to make the payments, which are now $4,400 a month.
A note in the system shows that the bank confirmed receiving documents on April 29 — pay stubs, tax returns, a letter disclosing her hardship, bank statements. Since then, the company has been waiting for WaMu to review the file.
But when Mr. Lavi calls, a representative coolly discloses that the application has been rejected because one document, a proof-of-insurance form, is missing. He must start over.
Start over? Seriously?
Even the success stories are depressing failures.
Another agent, Lee Wasser, props his feet on an adjacent desk chair as he waits on hold for more than 20 minutes to speak with GMAC Mortgage.
His clients, Dean and Nancy Piercy, owe $380,000 on the loan for their home in Shasta Lake, Calif. A logger, Mr. Piercy has lost work hours, making it hard for them keep up with their $2,048 monthly payment — soon set to rise.
Mr. Wasser has already negotiated a solution: GMAC will accept only $270,000 in repayment, allowing the couple to get a fixed rate mortgage from another bank.
But that suddenly is in disarray. The Piercys have been making their payments, but GMAC has been putting their checks aside, holding the money as “loss mitigation fees,” until their application is completed. It has notified credit bureaus that their loan is more than 90 days delinquent, which has lowered their credit score, disqualifying them for the next mortgage.
The whole article is like that, and who knows, perhaps the writer only cherry-picked bad examples. But the paucity of successful loan mods is well known, and given the sheer numbers who are probably trying to fix their housing situation, the bad experiences are probably representative.
The banks keep saying they’re training new workers and will have better systems in place, but our guess is that it won’t help. If the banks actually wanted to modify these loans, they would. Inertia, it seems, is more profitable. And so, like the health insurance companies, they’ve decided that efficiency and customer service are the enemies and that outwit and outlast is the proper strategy.
Who knows, maybe it’s time for a new, state-sponsored bank. A “public-plan” for banks, if you will. If people like their current banking system (raise your hands, all two of you) they can keep that. If not, they can go with the public one. Too bad Bank of America’s already taken.
All that being said, if things don’t improve on this front, we should rethink the wisdom of mortgage modifications. In many cases, it seems like it may be giving homeowners false hope, only to result in their still being underwater or stretched to make a payment. A greater tolerance for foreclosure, and letting the market play out, may be no less painful, and far less wasteful of both time and resources.
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