SACRAMENTO — It was the year that promised relief, opening with foreclosure moratoriums and a highly touted Obama administration initiative to keep millions of desperate borrowers in their homes.
But 2009 ended with the same old troubles.
Expectations of widespread and faster loan modifications are proving a disappointment, lost in disappearing paperwork and other problems, say people on the front lines of loan counseling. And more borrowers than ever, devastated by the housing crash, are falling behind on payments to loan servicers that are admittedly overwhelmed.
"I think, from my conversations with people at these companies, that they're trying to make this work. But they're just not getting it right," said Mike Himes, a counseling executive at Sacramento nonprofit Neighborworks Homeownership Center.
"A lot of time is just being wasted looking at these files over and over again and making changes. I hear it all the time from borrowers, that 'I'm just ready to walk away,' and in some cases they do."
As of November, only 4.3 percent of active loan modifications granted by banks under the federal Making Home Affordable Program had been made permanent — a total of just 31,382 loans nationwide. The program, unveiled in early 2009, aims to produce mortgage modifications for 3 million to 4 million homeowners within three years.
Exasperated borrower Cindy Foster of Sacramento says she's in the sixth month of a Bank of America trial modification that was supposed to be made permanent after three months.
"I call twice a week and they say, 'You're still in review,' " said Foster, a Kaiser Permanente staff member. "It's like they keep testing me."
Cameron Park borrower Vicky Messina, whose contractor husband has lost work and income, said she's twice received notices from Litton Loan Servicing that her house is being auctioned — even as she makes trial
Woodland borrower Jennifer Quigley made six months of trial modification payments to Wells Fargo, only to get a permanent modification offer that raised payments to 54 percent of her family's gross monthly income, not the targeted 31 percent.
"I said, 'This isn't our income.' They said, 'That's what's in our computer,' " said Quigley, laid off a year ago from the University of California at Davis. "You fax them everything. We've done it twice. They can't seem to keep track of anything you send them."
Bankers and lending industry representatives acknowledge they need to do better, but say there are many success stories that don't get media or government attention.
The nation's largest loan servicer, Bank of America, says it's moved 550 mortgage loan officers to modification desks, and aims to have borrowers assigned to one bank contact throughout the process.
It's also begun using imaging servers to store documents and prevent losses associated with paper faxes.
Bank of America blasted
BofA has endured some of the toughest criticism for its performance. A U.S. Treasury Department report in November said the firm had made only 98 permanent modifications, while presiding over 158,462 borrowers in trial modifications. More than 1 million of the bank's home loans are in arrears.
Jack Schakett, the company's chief credit loss mitigation executive, said BofA's permanent modifications will catch up to its competitors in early 2010. For those who don't qualify, he said, the bank has other programs, including temporary suspension of payments.
"The problem is dissipating month to month," Schakett said. "The noise level is down. It's not over yet, but it's getting better," he said in a recent conference call.
Schakett also contends that blame goes both ways: many borrowers don't send in timely or complete paperwork. Some want to walk away rather than try modification.
And more borrowers with lost jobs simply don't have enough income to qualify for the Making Home Affordable Program, which brings payments down to 31 percent of gross income, he said.
One man working on the front lines of the housing crisis predicted significant political fallout if another wave of foreclosures washes over the already battered nation. The resulting economic distress could make President Barack Obama a one-term chief executive, said Manny Randhawa, a loan counselor for elderly borrowers at Sacramento's California Senior Legal Hotline.
"We were promised a program to help 4 million people. It's helped 625,000, and those aren't even permanent modifications," he said. "It's a really disappointing result of the program that was supposed to bring us out of this housing mess."
Randhawa's organization is, nonetheless, on the verge of success in its effort to keep 89-year-old Citrus Heights borrower Faye Baker at home. She's struggled with the added costs of a 2006 home equity loan she took out to fix the house she bought in 1995.
After three rejections for a loan modification and more than a year of negotiations, Randhawa is finalizing a reverse mortgage with Baker's lender, One West — successor to the failed IndyMac Bank.
Randhawa said the deal would mean the bank would get two-thirds of the house's value, as opposed to getting much less by foreclosing, said Randhawa. The proceeds from the reverse mortgage will go to the bank. Baker won't get monthly payments, as is usually the norm with reverse mortgages. The lender will also get the house when Baker dies. Admittedly, said Randhawa, it's the best of a bad situation. But it keeps Baker in her house.
"Bank of America and IndyMac are banks in which we've had success doing these short payoffs," he said.
Rod Brown, chief executive of the California Bankers Association, said borrowers who qualify for the government's Making Home Affordable Program should realize that help is, indeed, possible.
"If they have the ability to qualify, they should be a combination of tenacious and patient to get through the process," he said. "If they have the income to make a modified mortgage, the bank is going to want to work with this."
Maybe so, says Sacramento loan modification specialist Mitzi Robinson. But she remains dismayed by "lack of communication internally" among lenders. One side of the bank will take payments on a trial modification she's negotiated; the other simultaneously sends a final foreclosure notice.
Elk Grove attorney Jonathan Stein said twice last month he's made banks cancel surprise auction dates for clients making their trial modification payments.
In Woodland, a frustrated Quigley said: "We're right at the end of our sanity. Come January we've been doing this for a year with no resolution."