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Credit:
The Recession’s
Impact
By Peter S.
Goodman
Published: June 28, 2009
LOS ANGELES —
Somewhere on earth, there must be a more difficult task than this:
persuading American mortgage companies to lower payments for
homeowners who can no longer afford their loans. But as Karina
Montenegro struggles to accomplish this feat for a troubled
borrower, she strains to imagine a more futile pursuit.
Foreclosures
Ms. Montenegro,
an intern at a local company that seeks loan modifications, dials
Washington Mutual to check on the status of an application for a
homeowner whose income has plummeted. She endures a Muzak-scored
purgatory while on hold.
Syrupy-voiced customer service representatives chide her for landing
in the wrong department. She learns that the documents her company
sent in have simply vanished — for the third time since November.
“I don’t know what happened,” says a customer service officer who
identifies himself as Chris. “I don’t know if there was a glitch in
the system, whether it was transferred from one call center to the
other.”
Think of the documents as being part of a pile massing inside the
bank, Chris suggests. “This pile is not going to be moved forward at
any point in time.”
Ms. Montenegro and her colleagues suffer these sorts of excruciating
exchanges all day long. It is a potent indication of the
difficulties afflicting the $75 billion taxpayer-financed program
created by the Obama administration in an effort to avoid
foreclosure for as many as four million distressed homeowners.
Under the plan, the government offers mortgage companies $1,000 for
each loan they agree to modify, then another $1,000 a year for up to
three years.
Hanging in the balance is more than the fate of individual
homeowners. The administration portrays its mortgage program as a
crucial piece of its broader effort to restore vigor to the economy.
If the effort fails, foreclosures will continue to surge and home
prices will probably keep falling, sowing fresh losses in the
financial system and threatening to crimp credit anew for businesses
and households.
Yet in the four months since the Treasury Department announced the
program, millions of new homeowners have slipped into delinquency
and foreclosure. For now, progress is constrained by the limited
capacities of mortgage servicing companies, said Michael S. Barr,
the assistant Treasury secretary for financial institutions. He
offered the first signs of the administration’s impatience with the
institutions that control home loans.
“They need to do a much better job on the basic management and
operational side of their firms,” Mr. Barr said. “What we’ve been
pushing the servicers to do is improve their infrastructure to make
sure their call centers are doing a better job. The level of
training is not there yet.”
The administration still does not know how many mortgages have been
modified under the program. In a recent interview, Mr. Barr
estimated the number at “over 50,000,” explaining that precise
figures must wait for a soon-to-be-completed tracking system.
By the end of August, the program should produce 20,000 loan
modifications a week, he said.
Tom Kelly, a spokesman for JPMorgan Chase, which now owns Washington
Mutual, affirmed the administration’s criticism.
“We’ve done a lot,” he said, noting that the bank has added 950 loan
counselors since the beginning of the year, bringing the total to
3,500. “But we’ve got a lot more to do.”
Two days in Los Angeles — where a loan modification company allowed
a reporter to listen as its agents contacted mortgage servicers
provided the firm not be named — starkly illustrated the problems.
The company charges homeowners $3,000, typically upfront, as it
seeks to persuade lenders to rewrite loan documents so as to lower
monthly payments. The company says it refunds the money when it
fails to secure a modification.
For Ms. Montenegro, a college student at the University of Southern
California, her summer job makes for fitting symmetry. In high
school, she worked as a clerk at a Washington Mutual branch in
Downey, Calif., which specialized in mortgages that invited
customers to make such tiny payments that their balances increased.
Many homeowners did not understand the terms: Once they owed a lot
more than their house was worth, their payments spiked. Now, that
day has come, and Ms. Montenegro is working the other side. She
calls WaMu, as the bank is known, trying to cut deals.
Among her clients is Vladimir Vishmid, who owes $490,000 on the
mortgage for his three-bedroom home in the Sherman Oaks section of
Los Angeles. Mr. Vishmid’s income as a self-employed computer
engineer has plummeted, making it hard for him to make his $2,542
monthly payments. He is current on his loan, he says, but behind on
his car insurance and utilities.
Software on Ms. Montenegro’s computer logs the details of the three
applications her company has submitted for Mr. Vishmid. Chris, the
WaMu representative, is telling her to send in No. 4.
“Personally, I’d submit a new file,” Chris counsels. “I’m telling
you honestly, anything over 30 days is a new submission for us.” |