San Francisco Chronicle
Banks comply with modification orders
In fact, the letter is part of a “new approach” Chase is trying with certain customers, “some of whom are current and have never called for help,” says Chase spokeswoman Amy Bonitatibus.
Instead of waiting for customers to apply and then requiring reams of paperwork, it is sending preapproved, streamlined refinance and modification offers to select borrowers in a FedEx package.
No fees charged
“If the only thing we are changing is the interest rate, they don’t have to sign anything,” Bonitatibus says. “If we change any of the terms,” such as changing the due date or switching from an adjustable rate to a fixed rate, then they have to sign and return the enclosed paperwork but don’t have to provide anything else. In no case is a fee required.
People cannot apply for this program, they can only be selected by Chase. It is only for first mortgages that Chase services and holds in its portfolio. Loans owned by Fannie Mae or Freddie Mac or held in a mortgagebacked security do not qualify.
Borrowers generally will be considered for a refinance if the balance on their first mortgage exceeds their home’s value, they have not missed a payment in the past 12 months, have no bankruptcies or prior modifications in the past 24 months, and have an interest rate greater than 5.25 percent.
Borrowers will be considered for a trial modification, which in most cases includes a principal reduction, if they are seriously delinquent and have not responded to or qualified for other types of solicitations or assistance including the government’s Home Affordable Modification Program. Customers will be reviewed for Hamp before being solicited for this program.
Chase is one of five banks that agreed in March to provide refinancing, principal modifications and other forms of borrower relief under a settlement they reached with federal regulators and state attorneys general, who had charged them with mortgage-servicing abuses.
Each bank has a quota to fill in each category within three years. For example, Chase must provide $537 million in refinances and almost $3.7 billion in principal reductions, modifications and other forms of relief. There are incentives for banks to complete modifications within the first year.
Chase will get credit toward its quota for any streamlined refinances or modifications it does under the new program. It expects to make “tens of thousands” of them, Bonitatibus said. It also will get credit for modifications it makes outside the new program.
The settlement required banks to solicit customers who may be eligible for assistance but did not require them to send preapproved offers.
Bank of America along with Ally Bank have “some additional obligations to identify a certain group of customers and solicit them for a particular kind of loan modification under the settlement,” says UC Irvine law Professor Katherine Porter, who was appointed to monitor the settlement on behalf of Californians.
In May, Bank of America began sending letters to about 200,000 struggling homeowners offering to reduce their principal by an average of $150,000.
“We offer this to eligible customers with loans the bank holds for investment (both owns and services) and loans we service for other investors when we have delegated authority. We expect the initial solicitation process for the principal reduction program to be completed around the end of August,” BofA spokesman Rick Simon said in an e-mail.
Borrowers are not prequalified for this program; they must submit various forms of documentation.
This month, BofA launched a streamlined refinance program similar to that offered by Chase. This program is only for first mortgages held by BofA. Homeowners must be underwater (owe more than their homes are worth) and current on their payments. There is no fee and the only documentation required is income verification.
Bill Purdy, an attorney in Soquel, said one of his clients in Southern California got an offer from Chase to reduce his interest rate to 4 percent. “He got it five weeks ago, he sent it in, he hasn’t heard anything since,” he says.
What’s more amazing, Purdy says, is that in the last couple of weeks, five or six clients have gotten letters from BofA saying that unless the bank heard back from them within 30 days, the bank would completely write off and forgive their second mortgage.
The borrowers “literally don’t have to do anything,” Purdy says. The only downside is that they will receive a form 1099 for the amount forgiven, which may be taxable.
Simon said “there have been some second-lien extinguishment offers” under the national settlement.
Purdy advises his clients to “seriously consider” such offers, especially if they result in a payment that would be less than it would cost them to rent a home.
Ask an attorney
Alys Cohen, a staff attorney with the National Consumer Law Center, says borrowers who receive such offers should have them reviewed by an attorney who is schooled in foreclosure issues. If you don’t have one, check with your local bar association’s pro-bono referral service, with the National Association of Consumer Advocates (go to naca.net and click on Find anAttorney) or, if you qualify for free legal assistance, go to nlada.org.
Consumer advocates say that despite the national mortgage settlement, these seemingly too-good-to-be-true offers are still the exception and that many borrowers are still encountering plenty of frustration in their attempts to have their loans refinanced or modified.
“There certainly isn’t a dramatic change in what’s going on,” Purdy says.
Last week, Joseph A. Smith Jr., the independent monitor appointed to oversee the settlement, said he has received preliminary data showing the relief activity conducted by each bank between March 1 and June 30. He said he is “thoroughly reviewing” and expects to issue a report within the next several weeks.