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April 18, 2014

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Federal government comes to borrowers’ aid

In an effort to improve home loan modification outcomes, the Obama administration has started a mortgage modification conversion drive.

The drive is intended to make loan servicers, such as Wells Fargo, Chase and Bank of America, more accountable to the program that helps homeowners facing foreclosure convert their trial home loan modifications into permanent ones.

The administration said its Making Home Affordable modification program has helped more than 650,000 borrowers. About 375,000 of those have begun trial modifications since the start of the program and are scheduled to convert to permanent modifications by year’s end. The Treasury and Housing and Urban Development departments have new borrower resources to convert as many trial modifications as possible to permanent ones.

The biggest of the banks that service loans will be required to submit to the government their plans for every loan modification they are working on, including the decision made to either approve the modification or deny it.

Senate Majority Leader Harry Reid released a letter Dec. 1 that he sent to Bank of America, one of the largest lenders in Nevada, urging it to establish an assistance center staffed with mortgage servicing and modification experts.

“In too many instances where my staff connects a constituent with a (Bank of America) employee to discuss a modification, the constituent later reports that (Bank of America) failed to be of any assistance,” Reid wrote. “I also receive reports that constituents who were denied a mortgage modification often do not receive any explanation for the denial. Additionally, the state of Nevada’s ‘Foreclosure Mediation Program,’ authorized by the Legislature this year, has had very limited success when (Bank of America) is involved. Out of the eight total mediations involving (Bank of America), seven resulted in the mediator’s conclusion of ‘bad faith’ on the part of the (Bank of America) representative.”

The Treasury Department is assigning account liaisons to monitor the programs at the mortgage servicers, with progress reports provided as frequently as daily to the administration. The intent is to make the loan modification transparent and allow the government to closely monitor progress being made by banks.

Those servicers that don’t comply with the rules could face penalties and sanctions.

Nevada Bankers Association CEO Bill Uffelman said that ultimately whatever program the government puts forth, banks will comply. But changing the rules midstream will slow down banks as they have to train staff on new, required documents.

“It’s frustrating when you’re trying to work on a program and they change the rules of it,” he said.

For borrowers, the changes were made to streamline the loan modification process with links to all the required documents.

Borrowers have complained that loan modifications are slowed down, even failed, because of missing documents.

“We are encouraged by the pace at which trial modifications are now being made to provide immediate savings to struggling homeowners,” said Phyllis Caldwell, Treasury homeownership preservation office chief. “We now must refocus our efforts on the conversion phase to ensure that borrowers and servicers know what their responsibilities are in converting trial modifications to permanent ones.”

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