Homeowners Backlash on Banks Loan Programs

A slew of struggling homeowners are coming forward with complaints about the way banks are operating under a federal loan modification program announced last year by the Obama administration.
You qualify.

Those two words, from the mouth of a bank representative last October, triggered a wave of relief for Tracy Davis and her husband James. The couple had been in and out of work for three years and were struggling to pay their mortgage–so when the Bank of America worker told them they qualified under a federal program to have their loan modified, they finally saw a path to keeping their house.

“We walked out thinking, great,” Tracy Davis said.

But weeks went by, and nobody contacted them, and they weren’t able to reach anyone — other than representatives at a call center in India.

“To this day, we’ve not heard from someone,” she said. “It’s February. This goes back to October 30.”

The Davises, who live in Cincinnati, are among a slew of struggling homeowners coming forward with complaints about the way banks are operating under a federal loan modification program announced last year by the Obama administration. The program, called the Home Affordable Modification Program, aims to keep 3 to 4 million people in their homes. Federal statistics show banks are making plenty of offers, but relatively few of those loan changes are being made permanent — of the more than 1 million homeowners who have started the required three-month trial period, only 116,000 have had their new terms made permanent.

The complaints have a common tune. Homeowners say the banks are giving them the runaround–either by pledging to modify loans and then not following through, as with the Davis family, or by signing them up for the trial period and then leaving them in limbo.

“This is an epidemic problem,” said Stuart Rossman, director of litigation with the National Consumer Law Center.

Under the terms of the Treasury Department program, participating banks that offer new loan terms are supposed to put homeowners through a three-month trial period. If the homeowners make timely payments and meet other conditions, the terms are supposed to become permanent.

But a pair of lawsuits filed in U.S. District Court in Boston this past week claimed Bank of America and Wells Fargo were violating those rules.

Rossman, who is helping to represent the plaintiffs, said banks–in Massachusetts and across the country–are stringing homeowners along for months without sealing the deal.

“That, to us, is inexcusable and a breach of contract,” he said. “They are living in limbo while they are at risk of losing their home.”