Lenders, Community Groups, Government Work toward Improvements in Mortgage Modification Process
Progress continues toward making loan workouts more accessible and streamlined for homeowners
Since February, a group that includes community groups like the Brockton Interfaith Community (BIC), the Patrick-Murray Administration's Office of Consumer Affairs and Business Regulation, the Federal Reserve Bank of Boston, the U.S. Treasury, and 10 banks, has been regularly meeting - including summit meetings on Feb. 19 and April 12 - discussing ways to make the loan modification process work better for homeowners. The group is focusing on three areas:
- Implementing a system that will improve transparency, give electronic access to homeowners and allow for electronic submission of documents;
- Creating a case management system through lenders that would establish a relationship between a lender representative and a homeowner, allowing for more consistent communication;
- Lenders committing to following Treasury recommendations and moving all eligible temporary modifications to permanent modifications within one month of completion of the three-month trial period.
"These are common sense proposals that could really improve the process for the borrowers and for the lenders as well. For example, borrowers and loan modification counselors are continually frustrated by having to follow up on their applications by calling a customer service phone number and never dealing with the same person twice," said Kris McDonald, Co-Chair of the Brockton Interfaith Community, a nonpartisan nonprofit faith-based community organization made up of 13 religious congregations. McDonald also co-chaired the recent meetings. "One of our proposals is assigning a case manager who will follow each family throughout the entire modification process. This not only makes sense for the families but makes business sense because it will streamline the process."
Foreclosure relief remains an important issue in Massachusetts, with thousands of families either in foreclosure or struggling to stay up-to-date on mortgage payments and on the brink of future foreclosure. According to the Warren Group, 1,372 homeowners in Massachusetts lost their home through foreclosure in April 2010, and the number of foreclosure petitions that month was 2,431. Overall, there have been more than 9,000 foreclosure petitions filed in the first four months of this year in Massachusetts.
Last November, BIC, took its foreclosure organizing to a new level by holding a public action attended by 600 Brockton residents. At that meeting the Federal Reserve Bank of Boston and Undersecretary Anthony committed to co-sponsor a meeting of national mortgage lenders, community advocates and foreclosure counselors to take action to improve the process of loan modification and offer real hope to homeowners throughout Massachusetts. That meeting was held Feb. 19, and since then the community groups, government officials, and lenders have communicated their progress toward these goals.
Lenders included in the discussions are American Home Mortgage, Bank of America, Carrington Mortgage Services, Chase, CitiBank, GMAC, Indymac/One Bank West, Lender Business Process Services, Saxon, and Wells Fargo. Also involved in the effort are representatives of Fannie Mae, U.S. Department of Treasury, Hope Now Alliance, U.S. Rep. Barney Frank's office and U.S. Rep. Stephen Lynch's office.
Participation in the meetings is part of the Patrick-Murray Administration's comprehensive response to the foreclosure crisis in Massachusetts. The Administration held 10 foreclosure prevention workshops around the state, giving 2,700 homeowners the opportunity to meet directly with their lenders one-on-one, with more workshops later this year. The Administration has also targeted more than $60 million in neighborhood stabilization funding, targeting areas hardest hit by foreclosures.
Additionally, the Division of Banks has worked with lenders and homeowners to secure about 1,500 foreclosure stays for families, has directed $3.8 million in grant funding to regional first-time homebuyer and foreclosure education efforts, and has created new licensing requirements and loan standards on the industry. Also, this month the Office of Consumer Affairs and Business Regulation announced a new loan modification scam awareness program, alerting homeowners to unscrupulous entities that take upfront payments with the promise of solving a foreclosure situation without delivering on that promise.
"Through Governor Patrick's leadership, Massachusetts has been a national leader in responding to the foreclosure crisis, but we must continue our efforts to provide as much help as possible to homeowners facing possible foreclosure," Undersecretary Anthony said. "This meeting was a meaningful step forward that will help homeowners better steer through a process that can be confusing and difficult."
The Federal Reserve Bank of Boston maintains a prominent role in a number of foreclosure-prevention actions, including organizing two major foreclosure-prevention workshops for troubled borrowers in Hartford and Boston, identifying and informing consumers of foreclosure help scams, conducting research and developing proposals to helping unemployed homeowners avoid falling into foreclosure, and partnering with community organization across New England.
"The Federal Reserve Bank of Boston is dedicated to avoid all preventable foreclosures," said Richard Walker, Vice President of the Boston Federal Reserve Bank. "These combined efforts are essential in improving the loan modification process and keeping more families in their homes."
These steps would help solve some of the problems that Carol Delorey, the chair of Brockton Mayor Linda Balzotti's Task Force on Foreclosure Prevention and Housing and a leader from St. Patrick's Church, started seeing in 2004. Delorey chaired the initial meeting with lenders, which focused on the issues that housing counselors in Brockton and around Massachusetts have been experiencing.
"The foreclosure problem started slowly but we could see that Brockton was going to be devastated," Delorey said. Her prediction was correct - Brockton has consistently ranked in the top four on the statewide foreclosure list for the past four years. "We've been working on a solution ever since."