Message from CEO

First, it is nice to see that someone in politics is not placing the entire blame for the current state of affairs on the borrowers. The reality of what happened over the last six years is really very simple and quite the opposite of the normal public perception. The entire loan process started with the investors (Wall Street). They were the ones who created the loans that were presented to the brokers and borrowers by the lender.

They would purchase these loans from the lenders and add them to their portfolios and expect a certain rate of return. In 2007 these investors stopped buying loans. This is the cause of the mortgage collapse. If they had just started raising the bar slowly, the market would have adjusted at a steady pace instead of collapsing.

Second, even though I understand why Congress feels it is necessary to do something, I do not believe that bailing out the same individuals that caused this problem is the correct course of action. It makes far more sense to loan these companies money at a reduced rate and place the burden of repayment on their shoulders rather than the taxpayers. You have to keep in mind; allowing congress to borrow money for the bailout is equivalent to printing money. The dollar will lose value on the world market, and the end result will be higher prices for every product consumed by Americans. We will be paying back this loan for generations.

Bill Boren
CEO

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NEWS - CNN 11/19/2009

Obama to push banks on mortgages

As foreclosure casualties mount, the Obama administration is expected to announce additional steps on Monday to get long-term help for troubled borrowers.

Under the new initiative, the government will provide more resources for borrowers and will partner with organizations to offer homeowners assistance, a Treasury Department spokeswoman said. The plan also calls for increased transparency and accountability on the part of loan servicers.

The administration's move is its latest attempt to jumpstart its $75 billion loan modification plan, which many fear will fall far short of its goal to help up to 4 million delinquent homeowners.

While some 650,000 people have had their mortgage payments temporarily adjusted, only a fraction have received permanent modifications. More comprehensive data should be released soon, but preliminary figures show the extent of the problem.

For example, fewer than 5% of the trial adjustments on loans owned or guaranteed by Freddie Mac were converted to permanent modifications as of Sept. 30, according to the mortgage finance giant.

Looking more broadly, the figures are even lower. As of Sept. 1, only 1.26% of all trial adjustments were made permanent after three months, reported the Congressional Oversight Panel, which monitors the government's use of bailout funds.

Meanwhile, more and more people are falling into foreclosure. The combined percentage of loans in foreclosure or at least one payment past due was 14.4% in the third-quarter, according to the Mortgage Bankers Association. That's the highest the group has ever recorded.

The struggle to score more permanent modifications highlights the depth of the foreclosure problem: Officials are leaning on banks to offer more homeowners trial relief, but the real test will be whether homeowners will receive lasting help.

"No one is really sure why the conversion rate is so low," said Mike Zoller, assistant economist at Moody's Economy.com. "We're concerned these loans will eventually become foreclosures."

The problems mount

Under the president's plan, delinquent borrowers are put into trial modifications for several months to make sure they can handle the new payments and to give them time to submit their financial paperwork.

Borrowers that qualify for a long-term modifications can keep making the lower payments for five years. At that point, the interest rate will be set at the rate at the time of the adjustment, or about 5% today.

Loan servicers, however, say they are having trouble getting the necessary documents from borrowers, while homeowners maintain that their financial institutions are repeatedly losing the paperwork.

And once homeowners send in their forms, servicers may find these borrowers don't have enough income or have too much equity or savings to qualify. Or it may just be more profitable for the bank to foreclose on the home than modify the mortgage.

While the foreclosure rate has eased a bit recently, some experts fear foreclosures will start rising again unless more people receive permanent assistance.

"Everyone is going to be shocked at the low conversion rates from trial modifications to permanent modifications," said Guy Cecela, publisher of Inside Mortgage Finance, a trade publication. The president's program "won't result in a significant number of loans being modified and won't put a significant dent in foreclosure rates."

To be sure, the initiative is still in a relatively early stage. The number of trial modifications did not really start ramping up until the fall, after administration officials pushed servicers to get more people into the program.

More recently the administration and servicers have lessened the documentation requirements and even hired firms to go door-to-door to assist borrowers with collecting the necessary paperwork.

Critics, however, say these measures are not enough. The main problem is that the Obama plan does not address the key factor behind the rising foreclosure rate, which is soaring unemployment. The loan modification plan is not designed to help people with little or no income.

Who is getting help?

Announced in February and launched in April, the foreclosure prevention program seeks to put troubled homeowners into mortgages where the monthly payments are no more than 31% of the borrowers' pre-tax income.

Some 650,000 people have been placed in trial modifications, which were originally intended to last three months but recently lengthened to five. To get into the trial period, homeowners only need to meet some basic criteria, including owing less than $729,750 on their mortgage and having monthly payments above 31% of their pre-tax income.

During the trial period, borrowers must send in the documentation needed to verify their income and expenses, including tax returns, pay stubs and bank statements. Homeowners must also be timely with their trial payments to receive long-term adjustments.

At JPMorgan Chase, about 92,500 borrowers, or just over half of those in the president's loan modification program, have made more than three payments. But only 26% of those have also submitted all of the required documents.

"We're not sure why we're not getting the documents from people," said Chase Spokesman Tom Kelly, who declined to say how many permanent modifications the bank has completed.

Citigroup, meanwhile, has converted about 1,800 borrowers into permanent modifications, said Sanjiv Das, head of CitiMortgage. The servicer has about 89,000 in trial modifications.

Citi, too, is having trouble with the documents. Often, borrowers send in paperwork that is not complete or has errors, Das said.

But Treasury's recent relaxation of the rules has allowed Citi to ramp up its efforts. In particular, servicers are now able to accept electronic signatures on tax documents instead of having to secure signed forms. As a result, the number of Citi borrowers whose files are complete has soared to 11,000, from 3,500 only three weeks ago.

"It will go up substantially" said Das, who expects Citi to place between 5,000 and 6,000 borrowers in permanent modifications by year's end.

A growing number of servicers are hiring companies to knock on borrowers' doors in hopes of getting the required income and tax statements.

"This will give [borrowers] someone they can talk to who is reliable and knowledgeable so they can turn that trial period into a permanent modification," said Brad German, a spokesman for Freddie Mac, which in late September hired a firm to work with servicers to gather the needed documents from homeowners.

Many servicers, including Citi and Chase, are working with such firms. Others have tried other ways to entice borrowers to provide their documents.

Saxon Mortgage Services, which leads the pack with 44% of its eligible delinquent borrowers in trial modifications, has offered homeowners in California and Florida $25 gift cards to come to company-sponsored foreclosure prevention events with paperwork in hand.

Only about 15% of the borrowers took Saxon up on its offer, a spokesman said.

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Only about 4% get long-term mortgage help

Only about 4% of troubled borrowers have received long-term help under the Obama administration's foreclosure prevention program, Treasury officials said Thursday.

A nearly equal number of trial modifications have been denied permanent assistance, the report showed. The reasons include not making monthly payments on time, not submitting all the necessary paperwork and not qualifying for reasons such as insufficient income.

The report, the first comprehensive tally of permanent modifications made, shows that loan servicers have converted 31,382 people from trial adjustments to long-term assistance as of Nov. 30.

But 30,650 people in trial modifications have been denied, according to Treasury officials.

The dearth of permanent modifications has fueled concerns that the $75 billion plan will fall far short of its goal to help up to 4 million delinquent homeowners.

The number of troubled borrowers currently in trial modifications rose to 697,026, up from 650,994, a month earlier.

"Our focus now is on working with servicers, borrowers and organizations to get as many of those eligible homeowners as possible into permanent modifications," said Phyllis Caldwell, chief of Treasury's Homeownership Preservation Office.

Banks and the administration have come under fire in recent months as delinquent borrowers languish in trial modifications. Lawmakers lambasted servicers and Obama officials at a congressional hearing Tuesday for not doing more to help homeowners facing foreclosure.

Last week, the administration announced it was ramping up its oversight of loan servicers' conversion operations, sending in SWAT teams to break up any logjams, and requiring banks to submit updates twice daily on their efforts. Administration officials called financial executives to Washington this week to urge them to quicken the conversion pace.

"We're not satisfied yet with how this program is unfolding," said Treasury Assistant Secretary for Financial Stability Herbert Allison at the House Financial Services hearing. "The servicers have a lot of work to do, and we're holding them accountable for their performance."

While the permanent modification figures are disappointing, there is still time for the Obama administration to turn the program around, said Alan White, a law professor at Valparaiso University. But he would like to see a big increase in the numbers in the next month or two.

"Treasury is aware there is a problem," White said. "We'll see if they are able to do something about it."

Thursday's announcement came hours after a report showed the foreclosure crisis might be mitigating somewhat. Foreclosure filings fell by 8% in November, the fourth consecutive month of declines, according to RealtyTrac, an online marketer of foreclosed properties.

The paperwork

Under the president's plan, delinquent borrowers are put into trial modifications for several months to make sure they can handle the new payments and to give them time to submit their financial paperwork. Once the modification becomes permanent, servicers, investors and homeowners are eligible to receive thousands of dollars in incentive payments.

If they qualify for a long-term modification, borrowers can keep making the lower payments for five years, after which time the interest rate is set at the rate at the time of the adjustment, or about 5% today. Borrowers in modifications are saving an average of more than $550 a month.

Loan servicers say they are having trouble getting the necessary documents from borrowers.

Some 375,000 people should be eligible to receive long-term relief by year's end. But only one-third of homeowners who have made at least three trial payments have submitted all the needed forms, Treasury officials have said. Some 20% have not submitted any paperwork. Banks and government agencies have hired outside companies to knock on borrowers' doors to assist them with completing the paperwork.

Homeowners, however, maintain that their financial institutions are constantly losing the paperwork.

Donna Belanus, who just made her fourth trial payment to Wells Fargo, has repeatedly faxed her financial information and hardship letter to her loan servicer after being told her file was incomplete. The Elkhorn, Wis., resident was told a month ago that she'd receive a decision soon, but she's still waiting.

"If you give them everything, they should have an answer," said Belanus, who saw her monthly payments drop nearly $350 under the trial modification. "I don't want to lose my home because they take too long. It's uneasy not knowing what's going to happen."

A Wells Fargo spokesman said Belanus' file is complete and is in the review process. She should be notified of a decision within 45 days.

Denied

Once their files are complete, borrowers may be denied long-term help if they don't meet the program's criteria.

At JPMorgan Chase, for instance, some 29% of borrowers offered trial plans did not make the required payments and are not eligible for permanent modifications, the bank reported. Another 51% have made the three required payments but have not provided all the needed paperwork.

The bank has launched a program to call borrowers 36 times, reach out by mail 15 times and make at least two home visits to retrieve the required forms.

About 20% have met all the criteria and the majority are expected to be put in long-term modifications soon, the bank said.

So far, some 4,302 borrowers at Chase have received permanent modifications, while another 16,131 have been approved for long-term help. The servicer has offered trial modifications to 199,033 borrowers.

"We continue to work very hard to convert customers from a trial modification to a permanent modification that lowers their monthly payment, but it has been a struggle," said Charlie Scharf, head of retail financial services at Chase.

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