In the terribly polite confines of the conference center at the Jacob Javits Federal Building in lower Manhattan, no one heckled, but front-line foreclosure prevention workers seemed to be engaged in a contest: How many ways can you say "frustrated"?
They are frustrated because while various state and federal initiatives have set out to help homeowners avoid foreclosure, precious few distressed borrowers are actually getting help.
All the laughing was taking place at a Home Foreclosure Prevention Summit sponsored by the U.S. Department of Housing and Urban Development, the bank-regulating federal Office of Thrift Supervision, a national network of nonprofit community development organizations called NeighborWorks and the Center for New York City Neighborhoods, a nonprofit set up by the city to respond to the foreclosure crisis. The daylong conference revealed the breadth of distance between foreclosure prevention workers, who offer free advice to homeowners at risk of losing their homes; banks and servicing companies, who hold the power to rewrite loans; and government regulators.
"I think we need to step it up," said Sarah Gerecke, executive director of the Furman Center for Real Estate and Urban Policy at NYU. "What we want is a system that we can rely on and feel secure in."
Few fixes
That's not the current landscape. The Center for New York City Neighborhoods found that of the 4,652 homeowners who've sought assistance from the center's 30 partner agencies since July 2008, 1,429 applied for loan modifications. But only 330—less than a quarter—were offered ways to make their mortgage affordable, whether through interest rate adjustments, extensions to the life of the loan or lowering the principal. It's not only that servicers are denying requests, the advocates said; it's that they can take months to even begin reviewing an application.
"I am very frustrated with the paperwork with servicers," said Eileen Anderson, senior vice president at Community Development Corporation of Long Island. "In my office we call it a fax-shredder," she said, venting about the difficulty of communicating with loan servicers who, advocates say, habitually lose modification applications.
The Homeowner Affordable Mortgage Program (HAMP), initiated by the Obama administration in April, was intended to permit homeowners at risk of losing their house to negotiate with the bank for lower interest rates or smaller mortgages. The theory is that it is in the interest of banks—or loan servicers who manage mortgages for banks and investors—to renegotiate the terms of a loan, rather than see a property go into foreclosure. The logic was that it was better for the bank or servicer to have loans repaid over a longer term or at a lower interest rate than to end up with an inventory of uninhabited real estate.
HAMP is available to homeowners who are less than a month behind on their mortgage who can demonstrate a hardship (such as loss of job) and those more than a month behind. The goal is to adjust payments such that homeowners are directing only 31 percent of their income to housing. HAMP is voluntary. Banks and servicers can choose to participate. If they do, they get a $1,000 incentive for each modification successfully completed. By the end of October, 650,000 trial modifications had begun through the program, the Treasury Department announced last week.
