Considering the losses banks take on foreclosures and the substantial government incentives being offered for them to make loan modifications, it’s not clear why banks aren’t moving faster to help troubled homeowners.

“It’s just, they (the bank) can’t, can’t, can’t,” says Amanda Dodson, a Chicago-area homeowner. “It’s frustrating, to say the least.”

She holds up a thick binder showing her 10 months of efforts to get a loan modification from Bank of America after her husband lost his job. At first, B of A said they could reduce the couple’s mortgage payment from $1,400 to $900. If they could have the lower payment for a year, Amanda estimates, they could have gotten back on track.

Unfortunately, in what has become a familiar story, Bank of America repeatedly lost the documents the Dodsons sent in and didn’t return their phone calls for months. Last month, the bank finally got back to the couple — and denied the loan modification without giving a reason.

“I’m feeling like they’re just letting it go until we foreclose,” says Michael, echoing the frustration of borrowers across the nation who are coming to the conclusion that banks would rather just foreclose than offer any real help.

Only a Fraction of Homeowners Getting the Help They Need, But Why?

There has been a lot of speculation about what is holding banks back from offering realistic loan modifications, whether through the federal Home Affordable Modification Program (HAMP) or on their own. No one is entirely sure, says Arnetta Pullin of the South Suburban Housing Center in Homewood, Illinois.

Pullin, a housing counselor specializing in foreclosures and predatory lending, says that banks and homeowners simply may not see eye-to-eye on whether relief is needed.

“The banks think, there’s enough money to pay this,” Pullin says. “We talk to clients face to face, and they have all these extenuating circumstances. Quite a few people are unemployed and getting unemployment compensation, but that’s not going to last forever.”

Others speculate that many homeowners will push themselves and eventually catch up on their payments in order to avoid foreclosure. That gives banks little incentive to cooperate.

Whatever the reason, Pullin points out that, of the hundreds of clients who have come to her for help, only a handful have gotten loan modifications. When HAMP was started in early 2009, its goal was to keep around four million homeowners out of foreclosure. According to the Treasury Department, only about 500,000 have received permanent loan modifications so far — and the rate of trial loan modifications being granted has slowed since June.

Even those who receive trial modifications may end up with an unexplained denial. For example, Ana and Avram Lungu got a trial modification from JPMorgan Chase Home Finance after the economy slowed down their business. They had no problem making the modified payment of $2,600 during the trial period, but the bank declined to make it permanent — again without explanation.

“I wish I could just sit down and have a conversation with the bank and have them say, this is why we’re denied,” says Ana Lungu. “I find that very shameful, very disgraceful on their part.”

Source: Southtown Star, “Mortgage modifications frustrate homeowners,” Elisabeth Martin, November 6, 2010