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Home loan modification hard to get, report says

July 22, 2011

Home Loan modification hard to get, report says
Leslie Berkman

09:47 PM PDT on Wednesday, July 13, 2011

California homeowners continue to have trouble getting home loan modifications that stick under the Obama Administration’s Home Affordable Mortgage Program, according to a report released Tuesday by the California Reinvestment Coalition, a consumer advocacy organization whose members provide foreclosure counseling.

“The findings of the report suggest that modifications are still hard to come by, and that servicers have not corrected many of the problems that have led to investigations of foreclosure abuses,” the coalition wrote in summarizing its findings after it reviewed data the Treasury made public earlier this year and its own latest survey of nonprofit housing counselors.

Among the highlights of its report:

Of 568,630 borrowers who have requested loan modifications, 46 percent were denied immediately, 23 percent received a permanent mortgage modification, and a third of applicants were stuck in trial modifications or had their modifications cancelled.

Principal reductions are nearly impossible to receive. In Los Angeles and Fresno only 5 percent of loan modifications included some degree of principal forgiveness.

94 percent of housing counselors reported that homeowners are losing their homes to foreclosure while still in negotiations with their servicers for loan modifications.

Much of the data released from Treasury was incomplete or inadequate for true transparency.

Regular folk might think that owners of big, expensive homes who are most behind on their mortgage payments and owe a ton of money to lenders would be among the first that banks would evict, sending their houses to a trustee sale.

But Sean OToole, founder and chief executive of, an online marketer of foreclosed real estate, in a blog reported his firm conducted a study that shows banks are taking longer to foreclose on higher balance loans where losses are larger and on loans for houses where they hold both the first and second mortgages.

O’Toole said he had figured banks would randomly foreclose on houses, with their primary aim to discourage borrowers from thinking they could live in their homes for free for years on end. But he said an in-depth study of bank foreclosures showed that “this game of chance is not completely random” and banks are seeking to delay digesting their largest losses. Under new accounting rules, they don’t have to report the loss on a failed mortgage until the underlying property is sold in foreclosure.

“The truth is that the larger the loan balance you have, the more upside down you are in the home, and the bigger the loss for the lender, the better your chances are of not being foreclosed on for a very long time,” writes O’Toole.

Reach Leslie Berkman at 951-368-9423 or


From → Homeowners, Sellers

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