Homeowners Face Delays And Penalties With Loan Modification Program

Many Connecticut homeowners facing foreclosure say they’ve been failed by the federal government’s loan modification program. As WNPR’s Harriet Jones reports, their stories are confirmed by a new analysis that shows more than 60% of homeowners who apply don’t qualify for the program.

The federal government’s Home Affordable Modification Program is supposed to provide an incentive for lenders to deal with homeowners who can no longer afford their mortgage payments. But an investigation and survey by Propublica found that it took an average of 14 months for homeowners to get a decision on a modification, and they might be forced to send their paperwork to loan servicers as many as 6 times. Servicers frequently make mistakes calculating income, and there’s widespread confusion over the standards homeowners must meet to qualify for the program. Sarah Usher from Vernon was turned down for a permanent modification, but she says the time she spent on a trial modification has ruined her credit.

“They told us here, we’ll start you on this trial payment, but you know what, don’t pay this month, we’re going to have you make your first payment next month. And it just snowballed. And then so finally when we got denied we received a bill for almost $8,000 because of late fees, saying we were several months past due. And so what do you do?”

Jeff Gentes of the Connecticut Fair Housing Program says he’s seen many homeowners frustrated by the process. He says borrowers need to understand the true intent of the program.

“It matters for the loan investor. It’s not about, at its core, helping homeowners, it’s about stabilizing the housing market. And if the loan investor makes more by working with you than by not, and by not means then going to foreclosure, then you’ll get a modification.”

Gentes recommends homeowners who are facing difficulties making payments should apply promptly for counseling about their situation through HUD or the Connecticut Housing Finance Authority.

For WNPR, I'm Harriet Jones.