Despite efforts by the federal government and banks to stop the home foreclosure disaster, frustrated borrowers still are battling red tape and delays in their attempts to negotiate lower payments, even as hundreds of thousands of them lose their homes every month.
Banks say they're swamped with inquiries and are just completing the first mortgage loan modifications under the Obama administration's Making Home Affordable plan, the program begun in April requiring borrowers to make three months of renegotiated payments before securing new loan terms.
Though the reasons are many, but the problem is simple: Banks aren't renegotiating enough loans to stem the rising tide of foreclosures, either through the federal program or on their own. "If the banks wanted it to work, it would work," said Fred W. Schwinn of the Consumer Law Center in San Jose.
The banks, however, continue to urge patience, particularly with the federal plan: "A lot of people had expectations from this program who didn't understand it would take time, but the intention is there and we'll move ahead," said Rick Simon of Bank of America Home Loans.
Never miss a local story.
Many banks started their own programs for modifying mortgages -- lowering payments by changing the interest rate or the length of the loan -- before the administration's plan was unveiled.
Angelo Gallo, 46, of San Jose, sought help from his bank lowering his monthly payments in January, before the Obama plan was announced. He said he and his wife, Mary, worked with their lender for five months, fulfilling numerous requests for more documents, but recently they were told they had to start over.
"I was so frustrated," Gallo said. "Every time you call it's a different person, and it seems like the files are all over the place."
Saturday, the bank informed him it would start foreclosure proceedings. But Tuesday, a bank representative told him he may qualify for the government plan.
"That's the first I heard about it," said Gallo, though the program was announced in early March.
The Treasury Department, which runs the Making Home Affordable program, declined to comment on criticism of the banks and said it will release data this month on how the program is faring. More than 50,000 loan modifications are in process and more than 270,000 borrowers have been offered loan modifications by 25 loan servicers, a department spokeswoman said.
Bankruptcy lawyers are particularly critical of the banks."There is an amazing lack of staffing to support the flood of modification requests the banks are getting," said San Jose bankruptcy lawyer Norma Hammes, past president of the National Association of Consumer Bankruptcy Attorneys. "Lenders lose stuff all the time and they ask for stuff they don't need. We have to jump over hurdles and through hoops."
Banks say they're doing the best they can given the flood of loan modification requests.
Simon said Bank of America's 7,400 "home-retention specialists" are taking about 80,000 calls a day. The bank has made more than 48,000 offers through the federal program and has 18,000 people making payments in their trial modification period.
JPMorgan Chase & Co. is moving through a backlog of 155,000 loans "as fast as we can, having hired nearly 3,000 people to help in the process, including 950 loan counselors," spokesman Thomas Kelly said.
A spokesperson for Wells Fargo declined to comment.