If I were in charge of sorting out the mortgage-default crisis, one of my first acts would be to arrange for these two people–both of whom strike me as friendly and reasonable–to sit down across a small table and hash things out. I’d provide coffee, pastries or even alcohol, if needed. I wouldn’t offer any government subsidies. Instead, I’d advise them to do whatever they can agree is in their mutual interests.
As I wrote in today’s Wall Street Journal, Ms. Parry has been trying for nearly two years to get a modification that would lower the mortgage payments on her home in Phoenix. She says she needs lower payments because her income as a mortgage-brokerage manager plunged after the housing boom. Mr. Cast is a first vice president at Capitol Federal Savings Bank in Topeka, Kan. Capitol Federal owns Ms. Parry’s first-lien mortgage loan. But a unit of Citigroup Inc. is the servicer on that loan, responsible for collecting payments and handling defaults.
That’s the problem. When Ms. Parry tries to get answers about her eligibility for a loan mod, she must go through middlemen in the form of call-center employees of Citigroup rather than talking to the person who ultimately makes the decision. Multiply that by some 8 million distressed American mortgage borrowers and you get a better feel for why it’s so difficult to work out who can get a mod and who can’t–and why so many people are angry and frustrated.
Let’s face it: Most people who want loan mods–and who wouldn’t want lower payments?–aren’t going to get them. Most of us won’t qualify for either the federal government’s Home Affordable Modification Program, known as HAMP, or any of the mod programs of individual banks, loan investors and loan servicers. The trouble is that it takes a long time–sometimes more than a year–to get to a yes or a no.
While awaiting answers, some borrowers keep making payments, exhausting their savings in what may be a futile effort to save their homes. They also incur fees from the banks and delay taking action that might give them a fresh start in a more affordable home.
“I had to learn the hard way and deplete my savings doing it,” says Ms. Parry, a manager at a mortgage brokerage in Scottsdale, Ariz. She now wishes she had put her home on the market two years ago instead of going through the loan-mod ordeal.
Ms. Parry bought her home in 2005 for $535,000 but believes it now would sell for around $250,000. She has been seeking a modification since June 2008. Her application was turned down in late 2008, but President Obama’s announcement of HAMP in February 2009 rekindled her hopes. Ms. Parry decided to keep making payments on her mortgage because she expected to qualify for this new program.
Citigroup started her on a HAMP trial in June 2009, and she made three payments under that plan. Then Citigroup told her there had been a mistake and she would need to go through another three-month trial. At the end of that second trial, Ms. Parry says, Citigroup told her that the investor that owns her mortgage, Capitol Federal, wasn’t participating in HAMP, so she couldn’t get a modification under that plan. Ms. Parry can’t understand why Citigroup couldn’t have told her that a year ago, sparing her a lot of anguish.
When I called Capitol Federal, I found out that things weren’t quite so simple as Ms. Parry had been told. Mr. Cast told me that indeed Cap Fed does have a policy against doing HAMP mods on loans that it owns, preferring its own in-house mod formula. But he also told me that Citigroup had told him at some point that it believed its servicing contract on Cap Fed loans allowed Citigroup to apply HAMP mods to them. Mr. Cast told me he would try to get clarification on Citigroup’s stance.
A Citigroup spokesman was unable to clear up this confusion for me but said: “We have worked diligently with the borrower and the investor in an effort to find a solution that meets both the borrower’s needs and the investor’s requirements.”
By James R. Hagerty
