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Article Describes Bureaucracy at Heart of Problems With Residential Loan Modifications

May 21, 2010

As Moreno Valley loan modification attorneys, we've long believed that banks' bureaucracy is a large part of the problem with the Home Affordable Modification Program. HAMP is the federal government loan modification effort intended to encourage banks to grant loan workouts to homeowners who meet certain financial standards. It has been under fire for most of its existence, in part because of banks' long delays, miscommunications and other problems that have kept it from helping more than a fraction of those the government believes are eligible. The Wall Street Journal's Developments blog, which focuses on real estate, zeroed in one the bureaucracy problem in a May 18 posting.

The post goes into further detail about Mia Parry, an Arizona homeowner featured in an accompanying article in the WSJ. Parry has been trying for almost two years to get a loan workout on her Phoenix home, which she says she needs because her income as a mortgage-brokerage manager dropped in the housing crash. Parry was originally turned down for a loan modification by her mortgage servicer, a unit of Citigroup, but decided to keep paying and try again when HAMP was announced. She was granted a HAMP trial modification last year... and then told she needed to do another. Then Citigroup told her that the owner of the mortgage wasn't participating in HAMP at all, so no modification could happen. Frustrated, Parry put her house up for sale, but only after draining her savings and incurring bank fees and stress. Further investigation suggests that Citigroup may not be right about the mortgage holder's policies.

The author writes that he wishes he could get Parry in a room with an executive at the mortgage-holding bank, rather than allowing Parry and others like her to be served by a revolving series of call-center employees who don't always get the story right. Implicit in this suggestion is the idea that the fundamental problem with loan modifications is bureaucracy. While our San Dimas loan modification lawyers agree that bureaucracy is certainly a culprit, our experience suggests that the problems go deeper. Banks' management might not be perfect, but it's generally good enough to keep the bank solvent and its assets secure. By contrast, lenders' behavior with loan modifications suggests that they're lucky to still be in business. We believe the difference is in the amount of profit banks expect to make. They are happy to devote resources and personnel to departments they believe will make money --but they think loan modifications are money-losers, so clients like Parry suffer through months or years of unnecessary stress.

At Howard Law PC, we have followed loan modifications from the beginning of the housing crisis. In that time, we've read multiple articles like this, recounting the difficulties faced by an ordinary person trying to overcome the indifference of a lender that repeatedly loses paperwork, ignores messages and sends mixed messages. Thanks in part to studies saying exactly this, we believe lenders don't devote the resources necessary to loan workouts because they believe they'll lose money on the transaction. That's why our Torrance loan modification attorneys start all of our loan mod cases with aggressive action showing the bank we mean business. We prefer to solve problems without going to court, but if the situation requires it, we can and will sue a bank to stop an unfair foreclosure, enforce an agreement or cancel a predatory loan.

If you need a loan modification, but you're struggling to get your bank's attention, Howard Law can help. To set up a free evaluation of your case, contact us through the Internet or call toll-free at 1-800-872-5925.