ce399 | research archive (esoterica)

Grave Errors as Undead Rework Loans (WSJ 23/6/10)

Posted in Uncategorized by ce399 on 26/07/2010

Sarah Larson had been trying for months to get a break on her mortgage payments when a letter from her bank arrived in March. Sitting at the dining-room table of her Minneapolis house, the 33-year-old acupuncturist ripped open the envelope and pulled out a list of important documents demanded by Bank of America Corp.

Bank statements. A utility bill. Her death certificate.

Ms. Larson, who was struggling to make her $1,055-a-month mortgage after client appointments dropped off by half, is in good health. So she replied to the nation’s largest bank in assets with a letter.


Matt McLoone for The Wall Street Journal‘I AM NOT DECEASED’: Sarah Larson was asked for a copy of her death certificate as she tried to modify the mortgage of her Minneapolis home.



“I am not sending a death certificate because I am not deceased,” she wrote. “I am currently still living.”

Turns out the bank had erroneously asked for proof of her demise—the sort of paperwork snafu that has roiled applicants since the Obama administration’s foreclosure-prevention plan was announced in February 2009.

The Home Affordable Modification Program has become famous for its snail’s-pace application process, duplicate requests for paperwork, and lenders who sometimes appear clueless as to the program’s rules.

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So far, the 17-month-old effort has delivered a permanent fix to less than 15% of the borrowers the administration said it could ultimately help. Through June, roughly 398,000 of the nearly 1.3 million homeowners who entered the program had been granted permanent fixes. But more than 520,000 borrowers have fallen out of HAMP.

A Treasury Department spokesman says about 45% of homeowners who fail to get HAMP modifications eventually win loan restructurings from their mortgage companies.

Across the nation, applicants are flush with tales of the absurd. Lenders and mortgage-payment processors—sometimes in error—ask borrowers to demonstrate the impossible. Or they ask them to verify events of many decades past.

“They’ve been taking my living money for the last 8½ years,” Ms. Larson says about Bank of America. “It wasn’t until I wanted to do something on my loan that they questioned my being alive.”

In Cleveland, a borrower represented by a housing-counseling agency called Empowering and Strengthening Ohio’s People initially was rejected for a loan modification. The reason cited by his bank: His wife’s death was a “short-term hardship,” according to an email sent by the bank.

“His hardship was that his wife died,” says counselor Robert King, who successfully pushed to reverse the decision. The family had lost half its income upon the wife’s death, and the borrower had exhausted other means of paying the mortgage, Mr. King says.

Aurora Loan Services recently wanted Wanda and Marlyn Behrendt of Harris, Minn., both 78 years old, to hand over proof of her retirement income, even though she retired in 1993 from her job soldering circuit boards for Unisys Corp.

Her tax documents and bank statements weren’t proof enough.

“I don’t know if they think we are trying to pull the wool over their eyes, but we certainly aren’t,” Ms. Behrendt says. She finally managed to get a personal identification number from her old employer that allowed her to access the retirement documents needed to complete the application.

Aurora, based in Littleton, Colo., is allowing the couple to make reduced mortgage payments while it decides whether they qualify for a permanent modification. A spokeswoman says the company abides by all government guidelines.

To modify a loan, mortgage companies must verify a borrower’s income, residence and financial hardship. Borrowers can be asked for additional documents for various reasons. “We keep stressing: Don’t overcomplicate the process,” says Laurie Maggiano, director of policy for the Treasury’s Office of Homeownership Preservation.

Treasury officials say start-up challenges were inevitable, adding that they continue working to strengthen the program.

J.P. Morgan Chase & Co. has long marketed to Spanish-speaking clientele and maintains a Spanish-language website. But in an April email to Bertha Cueva, a counselor from the bank expressed confusion over her retirement documents from the Social Security Administration.

“Bertha, I did receive the 4506 and SSI form but it was not in English!” the counselor wrote.

“You can tell it’s a Social Security letter,” Ms. Cueva’s daughter says. “It’s just in Spanish. That doesn’t mean she’s not going to receive the money.”

A spokesman for J.P. Morgan says it has “many bilingual loan counselors” and processed Ms. Cueva’s loan-modification request “using the Spanish-language documents.”

Ms. Cueva’s daughter says her mother was recently denied a loan modification because her income wasn’t sufficient and will have to move out of the home in the next few months.

In some cases, applicants’ spending patters are scrutinized in ways they find perplexing. David Rodriguez-Cruz was denied a loan modification on his two-bedroom San Diego home this spring. He says a Wells Fargo & Co. employee told him he spends too much on gasoline—but not enough on household utilities.

“We spend more time outside the house,” says Mr. Rodriguez-Cruz, who has a one-hour round-trip commute from his job as a refrigeration technician near the Mexico border.

A Wells Fargo spokeswoman says the bank “must be able to document that the customer is facing a true hardship … [and] determine if the customer can make the payment on his or her own without our help and, if not, what payment he or she can afford.”

As for the still-living Ms. Larson, a Bank of America spokeswoman says an outside vendor hired to help collect her documents “erroneously included a death-certificate request in a document collection letter for a small group of customers.”

The “majority of affected customers” were sent a corrected letter and got a follow-up call, the bank spokeswoman says.

Earlier this month, Ms. Larson accepted Bank of America’s offer of a permanent loan modification.

“It wasn’t necessarily the deal of a lifetime, but it should allow me to make significant headway on my credit-card bills,” she says. “It’s going to save my neck in the short run.”

Write to Ruth Simon at ruth.simon@wsj.com



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