The lawyer who wrote me disagreed, blaming lenders for thwarting the government's efforts.
A May 17 Demos article by Marcus Stanley, policy director of Americans for Financial Reform, said the government, in effect, handed the program over to the mortgage servicers, even though it was qualified to do the work.
As a result, Stanley said, servicers reject more than one-fifth of applications for paperwork reasons, often because the paperwork was lost by the servicers themselves.
An October ProPublica survey found "that homeowners seeking modifications had to send the same documents an average of six times before they were received," according to Stanley. If the paperwork hurdle is overcome, servicer bureaucracy results in "substantial delays in determining eligibility," he said.
According to Stanley, servicers often reject modifications because they decide the borrowers aren't in enough financial trouble.
"When they do grant modifications, they rarely reduce the total debt burden of the consumer," he said. "Instead, modifications generally cut interest rates temporarily and reschedule payments."
As I have reported in this column over the last three years, servicers' collections departments often continue to process foreclosures even as their loss-mitigation people work on mortgage-modification applications.
In a June 3 "Home Economics" article in the Business section, I reported RealtyTrac chief economist Rick Sharga's strong recommendation that delinquent borrowers start talking with their lenders about refinancing or modification while things are in the loss-mitigation stage.
Homeowners' troubles get tougher when their delinquencies hit the collections departments, which simply want them to pay up or prepare to leave their homes.
