The prolonged economic downturn and sustained high unemployment, coupled with the collapse of the U.S. housing market, have led to challenges that are more profound and complex than anyone anticipated. For a borrower, the prospect of falling behind on mortgage payments due to loss of income would be a wrenching personal situation in normal times. But these are not normal times.
These customers depend on us, Treasury, GSEs, lenders and servicers to have a solution for their unprecedented needs. The good news: we have worked together at extraordinary speed to create solutions—like HAMP—and to retool mortgage servicing. Unfortunately, those solutions have not met all of the needs nor have they been executed well in some cases.
It’s important to note that despite the hardships most Americans are facing, more than 86% of Bank of America customers remain current and are making their mortgage payment each month.
Whether one of our customers has just missed his or her first mortgage payment or is many months delinquent and at the point of foreclosure, Bank of America believes the customer’s experience with us, from start to finish, must be consistent, accurate and understandable.
We have, however, reached a crossroads between loan modification efforts and the reality of foreclosure. Fortunately, early stage delinquencies are stabilizing. The majority of initial volume and backlog of customers seeking solutions have been evaluated for available programs. We’re reaching a peak where some customers will be dealing with the reality that despite the myriad of programs and our best efforts, foreclosure is unavoidable. That has driven an increase in the concerns you and we hear from distressed homeowners and our increases in staffing and foreclosure alternative programs are directed at moving through this difficult period.
It is our responsibility to be fair, to be responsive and, where a foreclosure is unavoidable, to treat customers with respect as they transition to alternative housing. We, and those who work with us in connection with foreclosure proceedings, also have an obligation to do our best to protect the integrity of those proceedings. When and where that has not happened, we accept responsibility for it and we deeply regret it.
When industry concerns arose with the foreclosure affidavit process, we took the step to stop foreclosure sales nationwide and launch a voluntary review of our foreclosure procedures. Thus far, we have confirmed the basis for our foreclosure decisions has been accurate. At the same time, however, we have not found a perfect process. There are areas where we clearly must improve and we are committed to making needed changes.
Role of the Servicer
Traditionally, a mortgage servicer’s primary function is to collect loan payments from customers and to distribute payments to the investors who own the loan. Until recent years, foreclosures were ancillary and loan modifications were essentially nonexistent.
Duties to investors add complexities to the execution of modification programs and can result in confusion for customers. For example, Treasury, investors and other constituencies often change the requirements of their modification programs. HAMP alone has had nearly 100 major program changes in the past 20 months. Fannie and Freddie, as investors, have layered on additional requirements, conditions and restrictions for HAMP processing.
We have completed more than 614,000 proprietary modifications and 85,000 HAMP modifications. Given the majority of our delinquent borrowers are not eligible for HAMP today, proprietary solutions have been critical to provide meaningful options for those who fall outside the requirements of HAMP. We have completed over 95,000 second-lien modifications and were the first servicer to implement the Treasury’s second lien program—2MP.
If all home retention options are exhausted and there is not a viable alternative to create an affordable payment, we offer short sale and deed-in-lieu solutions that allow customers to avoid foreclosure and ease the transition to alternative housing. Earlier this year, we launched a proprietary cooperative short sale program that proactively solicits customers in late stage delinquency to provide assistance. We are also fully operational with Treasury’s Home Affordable Foreclosure Alternatives program. We’ve completed nearly 70,000 short sales through the first three quarters of this year.
Our intent is to exhaust all modification, short sale and other disposition options before foreclosure. I would like to inform you of some key decisions and commitments we have made to address concerns we have heard.
Single Point of Contact
A frequent source of frustration for customers is when they feel they are being passed around the system, seemingly never talking to the same person twice. We are addressing this by redesigning our modification process to offer a single point of contact for every eligible borrower.
We are in the midst of implementation and more than 140,000 customers have already been assigned a single case manager to whom they can always turn with questions or concerns that arise throughout the process.
Reform of Dual Track System
Parallel foreclosure and modification processes are required by many investors and reflect an industrywide servicing practice. This so-called dual track process has been a source of confusion for customers.
We want to be a partner with you, state attorneys general, other servicers and investors in looking for ways to change industry practice with respect to evaluation of borrowers for modifications after they have been referred to foreclosure to mitigate the very real concerns we have heard about that practice.
Customer Status Checklist
Customers are understandably frustrated when they are unsure where they are in the process of modification or foreclosure. To address this and provide greater clarity, we are working to create a Customer Status Checklist, so that customers will have a document in hand to understand their status, the steps they have completed, reasons decisions have been made and what additional steps remain.
Housing Rescue Fairs and Outreach
By establishing a presence in the community, we’ve had greater success reaching customers who have not been responsive to more traditional contact methods.
We’ve deployed Customer Assistance Centers in areas most impacted by the housing downturn. We’ve also launched mobile home retention teams who travel around the country meeting with customers.
We’ve had considerable success in working with nonprofit partners such as the Neighborhood Assistance Corporation of America and National Association of Asian Pacific Americans for Community Development. We established the Alliance for Stabilizing our Communities—the first national multicultural outreach and home retention effort to address foreclosure prevention in diverse communities. Through the alliance, 34 home rescue fairs have been completed serving more than 9,800 families. We find that the opportunity for customers to work with a trusted nonprofit and get the chance to meet with their servicer face-to-face can enhance the response rates of borrowers and the chance for a successful modification and we are committed to increasing the resources committed to face-to-face contact in 2011.
Enhanced Transition Services
When we cannot change the foreclosure outcome, we can ensure the process is respectful. We have been in conversations with other nonprofit agencies and with HUD to determine how we can most effectively engage them to help customers in the transition of households to alternative, more affordable housing.
Barbara Desoer is president of home loans and insurance at Bank of America
