Disabled and unable to work, Vermont home owner Lucy Circe applied for a modification to her mortgage loan from Bank of America. The bank made error after error in processing her application. Bank of America frequently asked for document copies it already had, asked Circe to prove she was no longer married to a man whom she did not know, and asked why she wanted to dispose her property, even though she had told the bank she wanted to keep it.
The experience of Ms. Circe was not unique, according to a critical report on the federal government’s Home Affordable Modification Program (HAMP).
The Obama administration estimated in 2009 that the HAMP program could help as many as four million home owners seeking a mortgage modification.
But only 887,001 borrowers are participating in the HAMP program, according to a report by Christy L. Romero, a government official who monitors the program. Romero is inspector general of the Troubled Asset Relief Program.
Participating banks have rejected 72 percent of HAMP applications. The number of rejected borrowers is four million, the same number of borrowers that the Obama administration hoped to help through HAMP.
Banks have valid reasons for some rejections. For example, 38 percent of HAMP applications are rejected because they are incomplete.
The HAMP-application rejection rate is 87 percent at CitiMortgage, part of Citibank; 84 percent at JPMorgan Chase, 80 percent at Bank of America and 60 percent at Wells Fargo, according to the report by Romero. Banks have valid reasons for many rejections. For example, 38 percent of HAMP applications are rejected because they were incomplete.
Representatives of JPMorgan Chase and Bank of America disputed the rejection rates in Romero’s report on HAMP.
A Citibank spokesman, Mike Rodgers, said the bank has made a commitment to keep troubled mortgage borrowers in their homes. He also said the bank has approved 100,000 loan modifications under HAMP, equal to half of the applications that were complete.
A spokesman for Bank of America, Rick Simon, said two-thirds of its HAMP applicants failed to qualify, but “five out of six … avoided foreclosure through either a modification or another solution.”
But Romero, the author of the report on HAMP, said high rates of application rejections indicate a problem with banks, not borrowers.
Among the design flaws of HAMP is leeway for lenders to apply their own individual procedures to the application process, which can be exceedingly slow.
Ms. Circe, the Vermont home owner, got a denial a year after she applied to Bank of America for a loan modification under the HAMP program in October 2013. The bank cited the fact that she was unemployed, even though Social Security disability insurance income and rental income on her house would be more than adequate to cover modified mortgage payments.
But Ms. Circe persisted, and finally, in April of this year, Bank of America modified her mortgage loan. Jessica Radbord, a lawyer at Burlington-based Vermont Legal Aid, helped Ms. Circe gain admission to the HAMP program through Bank of America. Radbord said she was stunned by “all these strange reasons for denials. What really bothers me is, how on earth would a homeowner ever be able to do this on their own?” [New York Times] – Mike Seemuth