A federal program intended to help reduce mortgage payments and lower interest rates for struggling homeowners is barely scratching the surface of need in North Carolina, where thousands of families are under threat of losing their homes.
The Home Affordable Modification Program (HAMP), backed by $75 billion in stimulus and other federal dollars, was supposed to usher 3 to 4 million American homeowners into more affordable mortgages. A newly negotiated payment plans could chop ballooning mortgage payments down to 31 percent of a family’s household income or less.
Instead, more than a year and a half after the program started, only 520,000 people across the country have found their way into permanent loan modifications. Those in permanent modifications make up less than half of the 1.4 million homeowners accepted for trials in the program, according to an October performance report from the U.S. Department of the Treasury.
In North Carolina, only 9,137 homeowners have been approved for permanent HAMP loan modifications.
Approval for permanent loan modifications is left up to the banks and mortgage lenders, who cancelled more than half of the trials initiated by struggling homeowners, according to HAMP data.
This spring, a scathing report from the Troubled Asset Relief Program (TARP) inspector general called the HAMP program “disappointing” and questioned “whether HAMP is worth the resources being expended or whether the program needs to be re-vamped to actually help more borrowers.” Since then, the enrollment numbers have increased but are still below expectations.
The HAMP program could see its participation go up, and thus help avoid people from losing their homes, if banks and servicers were required to look to loan modification programs like HAMP as an initial option for defaulting homeowners and move to foreclosure as a last resort, said Chris Kukla, government affair counsel for the Center for Responsible Lending, a Durham-based consumer rights and lending group.
“It is up to servicers to decide if they were going to participate and to what extent,” Kukla said. “There was a lot of carrot and no stick.”
The low participation levels in HAMP come as foreclosures continue to rise across the state. This week, North Carolina will surpass the record number of 63,286 foreclosure filings it had last year. By the end of the calendar year, the state is anticipated to see 70,476 foreclosure filings, according to a N.C. Justice Center analysis of state courts data. Mecklenburg and Wake counties top the state in the numbers of foreclosures.
North Carolina was spared a lot of the massive casualties seen in states like California and Florida in the fallout to the subprime mortgage crisis. That’s largely because mortgage lending laws in North Carolina have more protections for consumers and some predatory loan operations were dissuaded from setting up shop in the state, Kukla said.
Many of the homeowners in foreclosure proceedings now have experienced some type of hardship, like unemployment, a cut in hours, divorce or major illness, Kukla said. Foreclosures tend to lag unemployment by a year or more, meaning that the state may be reaching its peak in foreclosures now, he said.
“We’re still going to see a lot of pain,” Kukla said. “We’re still hearing a lot of stories of people that are trying desperately to get a modification but can’t get an answer.”
Homeowners in North Carolina, like others around the country, say they’ve spent months waiting to hear back from their banks if they qualify for the program. Many have had resubmit long applications multiple times or even had foreclosure proceedings started against them by the same mortgage servicer also actively reviewing their loan modification application.
For the past two years, James and Candie Lovelace family has been trying to get the loan on their 900-square foot Rutherford County house modified from Bank of America when James lost his job in 2008.
The couple had no luck, and were served with foreclosure papers in February of this year. In March, they heard about the HAMP program and submitted their application. They’ve yet to hear if they’ve been approved, and are preparing themselves for February when a scheduled foreclosure hearing will determine if they’ll be able to hold onto their house.
They’ve checked up on their application for a loan modification several times, but can’t get anyone to tell them what the status is of their request, or when they’ll hear back, said Candie Lovelace.
“The uncertainty of not knowing what’s happening is really hard,” she said. “So far, we’ve not been told anything except that we’re under review.”
The family fell behind on their mortgage payments when James, who provides the family’s income while Candie stays home with their three young children, lost his manufacturing job. He was out of work for 15 months in 2008 and 2009, before landing a new job in January of this year as an electrician’s assistant.
His new job pays $12 an hour, and gives the family of five $2,000 a month to live on.
The family has trimmed back on their spending to live on Travis’ salary, and to catch up on the bills that went unpaid when James was unemployed. The family never eats out, and clothing for their three growing daughters comes from consignment or thrift shops.
James has avoided medical treatment for his chronic back pain while the family turned to their church to help pay for a nearly $3000 helmet their infant daughter needs for a medical condition that puts her at risk of a misshapen head.
They’ve made enough room in their budget and can afford a $664 monthly mortgage payment, but fear Bank of America won’t approve the HAMP loan modification and foreclose on them anyway. Candie Lovelace said the months of waiting to find out has taken the biggest toll on her husband, who worries about what will happen if the family loses their home.
“We don’t know what’s going to happen,” Lovelace said. “We just want some answers about how we can keep our house.”
The N.C. Attorney General’s Office has heard from many consumers like the Lovelace who complain of having to wait for months, resubmit the same documents and forms multiple times and facing foreclosure proceedings started by a different branch of the same mortgage services while still waiting to hear back on their modification applications, said J.B. Kelly, legal counsel at the N.C. Attorney General’s Office.
“The complaints are so consistent across the fifty states, it’s hard to believe that consumers are making it up,” Kelly said.
The problems plaguing the loan modification process are also under review by the nation’s 50 attorneys general as part of a far-reaching probe into the mortgage industry following the “robo-signing” scandal in the mortgage industry earlier this fall. The robo-signing scandal, which led to half of foreclosures in several states other than North Carolina, followed reports in the media that major servicers were using affidavits to foreclose on people’s homes that had been signed in bulk and not examined closely.
Kelly expects that increasing the access and ability of consumers to have their loans modified will be factored into the findings of the 50-state investigation.
“Many of them (consumers) want to do right, and they don’t know how to do right,” Kelly said. “Hopefully the 50-state investigation will help in that process.”
For questions on this story, contact N.C. Policy Watch Reporter Sarah Ovaska at (919) 861-1463 or firstname.lastname@example.org.