No luck modifying your mortgage either? Join the club.

No luck modifying your mortgage either? Join the club.

Are you one of the millions of Americans who have been trying to get your mortgage company to modify your mortgage this year?

There has already been tons of press on how unsuccessful most loan modifications have been.

We know that most people were seeking modifications because their exotic mortgages turned into exotic nightmares of variable interest rates and balloon payments. We know that most are now seeking to modify because of job loss, or wage reduction. These people have fixed rate mortgages that they could otherwise afford but for their loss of income.

And we are now finding out more information about why home owners’ applications are being denied.

Here’s a link to an NPR story that investigates behind the scenes at a Bank of America call center that is dedicated to answering calls from people seeking loan modification.

My take:
1. Banks are still grappling with digesting massive quantities of data gathered by mortgage originators that sometimes collected very sketchy data. In addition to that the banks are intaking new data from home owners and having to figure out how to integrate, validate, and analyze the new and old data. That takes time, money, and training. A certain amount of patience is warranted.

2. Banks have attempted to streamline the decision making process by writing programs that tell phone bank operators whether a caller ‘qualifies’ for a mortgage modification. As the NPR story points out–the program makes mistakes. It may have made a mistake on your application. The call center employees do not necessarily have the experience or training to know when the system has made an error. They are also not necessarily empowered to override the system. You should call back, be persistent, patient, and polite.

3. The Treasury is issuing periodic report cards on each of the banks who are modifying mortgages. Less than 20% of the applications to modify are granted. And to me, that means that you should be looking for Plan B.

4. If you are trying to modify your mortgage, know that your bank is going to look at your debt load (which can be minimized or eliminated by filing bankruptcy) and your income. You are only going to qualify if the bank sees that your debt is low enough and your income is high enough to support the modification.

5. According to the NPR story, 2 million people are going to lose their homes to foreclosure this year–and that is the most since the Great Depression. I stand behind the proposition that you stand a better chance of keeping your home if you talk to a bankruptcy attorney who will help you decide the best course of action. Don’t wait until your retirement and savings accounts are gone. Don’t wait until your so far behind on the mortgage that there is no way of catching up.