Back in May, Bank of America announced their intention to offer tens of thousands of distressed borrowers mortgage relief. Today Bloomberg has an update on the program, and everything is not going according to plan:
When Bank of America Corp. sent letters to 60,000 struggling homeowners offering to slice an average $150,000 off their loans, the lender got an unusual response from most of them: silence.
Homeowners who fell behind on their payments began receiving the mailings in May, part of the bank’s effort to meet terms of the $25 billion industry settlement over foreclosure abuses. More than half haven’t responded as “borrower fatigue” causes them to tune out the offers, said Dan Frahm, a spokesman for the Charlotte, North Carolina-based bank.
The plan to offer principal reductions is part of the robo-signing settlement that state Attorney Generals reached with the big banks earlier this year. In order to qualify, the borrower must be underwater on their loan and at least 60 days delinquent. The loan also must be owned or serviced by BofA (my understanding is that loans that are owned by Fannie or Freddie are not eligible as the FHFA has not approved any principal reduction plans). Income documentation must be submitted in order to assure that the borrower would be able to make their new payments (thus the unemployed will not be eligible for these modifications). If a borrower qualifies and is approved, their monthly payment will be reduced to 25 percent of the borrower’s gross income.
Bank of America has more than 1 million borrowers who are at least 60 days delinquent on their mortgage payments (an incredible 85% of which stem from Bank of America’s disastrous acquisition of Countrywide back in 2008).
The article says that Bank of America has the lowest satisfaction rating of any large U.S. lender. It continues:
Borrowers have lost faith in Bank of America and other servicers, said Lisa Sitkin, managing attorney at Housing and Economic Rights Advocates in Oakland, California. Those seeking modifications have had their paperwork misplaced, been told conflicting messages and have had applications rejected based on incorrect information, she said.
“There’s incredible dysfunction in the way they set up their systems to handle this, and when mistakes happen, which is constant, they have very little ability to correct them,” Sitkin said. “If Bank of America is complaining about borrower fatigue, they can look to themselves for the reason.”
I think Ms. Sitkin hit the nail on the head. I think people are simply tired of getting jerked around. Between lost paperwork, dual-track foreclosure-modifications, extended response times for mod requests, multiple points of contact, and the failure of government loan modification programs such as HAMP, I suspect that distressed borrowers have had enough, but this is simply speculation on my part.
If you’re a BofA borrower, I’d like to hear from you. Are you participating? Do you want to participate but haven’t received an offer? Let me know in the comments section below.