New numbers from the federal government reveal a tiny glimmer of hope that lenders are doing a better job of helping homeowners avoid foreclosure, even though help is slow in coming. The same numbers also show some homeowners are slipping back into trouble after getting mortgage assistance.
The numbers are from the Mortgage Metrics report collected by the Office of the Comptroller of the Currency which tracks about two-thirds of the country's home mortgages.
What they show is a sharp jump in the first half of 2009 in the number of homeowners who are getting help from lenders modifying their mortgages. The increase in the second quarter of '09 alone is more than 185,000, up 55 percent from past levels.
Many of these homeowners are delinquent, they have fallen behind on their mortgage payments. They've worked out new terms with their lender that might help them avoid foreclosure.
Joseph Evers, the OCC's deputy comptroller for large bank supervision said the number of people who received mortgage modifications, or "mods," in the past but who have fallen behind again, or redefaulted, is also increasing.
"That doesn't speak well for foreclosure prevention," Evers said. "But the good news there is banks are responding by doing more mods and they're responding by doing more affordable and sustainable mods by reducing monthly payments."
In other words, some mortgage help in the past hasn't really addressed the issue of homeowners facing foreclosure not being able to afford their monthly mortgage payments. Loan modifications with their lender still haven't brought the payment down to an affordable level.
“...the good news is banks are responding by doing more [loan] mods.”Joseph Evers, Office of the Comptroller of the Currency
Another problem is the pace of mortgage modifications is very slow. One reason is banks don't have enough staff and haven't adjusted their computer systems to handle all the requests, according to Barry Zigas, director of housing policy for the Consumer Federation of America.
"Many consumers tell these horror stories of spending hours on the phone on hold, finally getting ahold of someone, being told to send these materials in, sending them in, following them up, and finding the materials never got there, have been misplaced, are incomplete and have to start the process all over again," he said.
That is the experience of homeowner Danyel Mattson, who lives in the Twin Cities suburb of Savage. Mattson said she and her husband paid the $470 fee to their bank to start the refinancing process.
After three months of waiting, they checked the status and learned they'd been turned down. She said she couldn't get back in touch with anyone to learn why or what they should do.
Mattson said they finally reached someone who said they could pay another fee and start over.
"We re-submitted and we had to pay [a] $50 resubmission fee," she said. "They waived another $470 fee they said that we would possibly have to pay again."
Mattson said their refinancing appears to be back on track, and they may emerge with a new mortgage.
The Consumer Federation of America's Barry Zigas worries the key issue behind all the problems is this country's approach to helping homeowners. Zigas said the various programs out there - the banking industry's Hope Now program, the Obama administration's Making Home Affordable plan - don't match reality.
"It has expectations of ability to pay that cannot be met," Zigas said. "[It] focuses on reducing the interest rate of the loan but not the principle, which still leaves people paying perhaps on a loan that is substantially larger than the home is now worth and is substantially larger than they were ever able to pay."
Dire as the picture may appear, Joseph Evers from the Office of the Comptroller of the Currency counsels patience.
The inner workings of the Obama administration's $75 billion Making Homes Affordable plan are still being worked out.
The country's biggest lenders, resuscitated with massive amounts of taxpayer supplied bailout money, are slowly but apparently surely, Evers said, getting up to speed.
"It's way too early to conclude that these mod programs aren't working," he said.