This article first appeared in the St. Louis Beacon, June 10, 2010 - It took one very long year that resulted in one very large stack of paperwork, but Craig McIntosh believes he has finally reached a deal with his lender to modify the mortgage on his neatly kept, two-story brick home in the Southwest Garden neighborhood of St. Louis.
This puts McIntosh into a still shallow pool of homeowners who have found success through the federal government's Home Affordable Modification Program (HAMP). And, despite a glacially slow start, the program appears to be helping an increasing number of American homeowners keep their homes.
In announcing the HAMP program, President Barack Obama said that it could enable 3 million to 4 million American homeowners to modify their mortgages. HAMP offers financial incentives to lenders who modify the mortgages of struggling homeowners who qualify financially. Participating lenders are required to reduce monthly mortgage payments to no more than 31 percent of a borrower's income.
But the HAMP process isn't an easy one and it took months longer than program guidelines suggest, says McIntosh, who has logged every phone call to his lender -- from his first call for assistance on May 19, 2009, to his call last week for clearer directions on how to send his new mortgage payment.
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The log reads like an exercise in futility: repeated requests for documents already submitted; contradictory notices that, on one hand, assure him that his modification is proceeding and, on the other hand, threaten legal action because he is in default.
But 13 months and hours of phone calls later, McIntosh believes the process was worth it because his monthly payment has been reduced by about $800, and he can afford to make it.
"I am so grateful for the loan modification program,'' he said. "I don't know that I'd be in my house if it weren't for this. And as big as a headache as it's been and as mismanaged as it's been, in the end I'm grateful because I get to stay in my home. I have a payment I can live with now."
McIntosh echoes what homeowners across the nation have been saying since the HAMP program started: Their loan servicers weren't prepared for the modification surge.
"They have no capacity for managing this,'' he said. "We're all used to bureaucracies where the right hand doesn't know what the left hand's doing. That's what this is to the nth degree. They don't have the capacity to handle everything that's been thrown at them."
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The grand scheme of things
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McIntosh, a 44-year-old social worker, said he found himself struggling to make his $1,900 mortgage payment after his divorce in 2008 -- which also coincided with the worst U.S. economic downturn since the Great Depression.
McIntosh, who was self-employed, saw fewer clients able to pay for his services; he now works 30 hours a week for an agency. As his income dropped, so did property values -- which put refinancing out of his reach.
"The house is $40,000 under water. I didn't have the option of refinancing. I didn't have the option of selling," he said.
But unlike a growing number of Americans who found themselves in a similar boat, McIntosh said he never considered walking away from the house he and his wife purchased in 2004, when housing prices were at their height. To generate income, he rented the upper floor of his home to a tenant. And he began negotiations with Chase Home Finance, which services his loan that is owned by Fannie Mae.
To understand the significance of McIntosh's success, it is important to know where he stands amid some still dire statistics:
- McIntosh is one of just 300,000 American homeowners who have managed to get a permanent HAMP modification since the program was launched by the U.S. Treasury Department in March 2009.
- In April, McIntosh was one of 68,000 trial modifications that became permanent -- an increase of almost 13 percent from March, according to HAMP statistics.
- McIntosh is one of just 3,431 Missouri homeowners who as of April had been placed in permanent HAMP modification plans. (About 7,626 Missouri homeowners are currently in trial modifications.)
- He is one of about 40,000 J.P. Morgan Chase borrowers nationwide who successfully made it to permanent modification. Since HAMP started, nearly 190,000 Chase borrowers have started the modification process and about 120,000 are currently in trial modifications, which are supposed to last just three months.
(A recent investigation by ProPublica showed that Chase has the most homeowners waiting more than six months for a final answer on whether they'll get a permanent modification. To read that story, click here.)
And yet to put it another way:
- McIntosh's home is NOT among the 3 million U.S. foreclosures projected for 2010 by RealtyTrac, which tracks foreclosure statistics.
- He did NOT receive one of the 3,841 new foreclosure filings in the state of Missouri in May.
- McIntosh's home is NOT among the 432 new foreclosure filings in St. Louis in May.
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Patience and persistence
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According to HAMP statistics, about 265,000 of the 1.2 million homeowners who began a modification in the last year were left in trial modifications for six months, which is double the time the trials are supposed to last.
McIntosh says his "three-month" trial, which started in September 2009, wasn't made permanent until April.
While the mortgage crisis was sparked by subprime loans gone bad, the predominant hardship reason for permanent modifications now is loss of income: 60 percent of applicants cite income while 10 percent cite excessive obligation, according to HAMP statistics. Loss of income includes borrowers who are employed but have faced wage and hour cutbacks, as well as the unemployed.
Borrowers in permanent modifications average a payment reduction of 36 percent, which is more than $500 a month, according to HAMP statistics.
For the first five years of McIntosh's modified 40-year mortgage, he will pay about $1,100 a month at 2 percent interest. The interest rate will gradually increase through years 6 through 8, leveling off at 5 percent for the duration of the loan. To qualify for the modification, McIntosh was told by Chase not to pay his mortgage for three months. Those missed payments and some penalties were tacked onto the principal.
McIntosh says he realizes that, in the end, he will pay more for his house than his original loan and that, technically, his home is still under water. He says the modification has given him time to sort out the details.
"From a survival standpoint, that's fine. I have a mortgage payment I can make,'' he said. "But because I've been making lump sum payments, it's been difficult to figure out how much is going to escrow and taxes. And I'm not at all confident that they would have done those numbers right.''
His immediate concern is fixing his credit score, which took a hit during the drawn-out modification process, when he said Chase was reporting him as delinquent to creditors.
"I'm grateful that it's all going to work out, but my credit has been adversely affected more than it should have been, it appears to me,'' he said. "For three months I didn't pay my mortgage. Fine. That's on me. Every month since then I've paid exactly what they told me to pay and yet I've continued to be shown as delinquent. And I continue to get collections calls. It looks like I've been reported as delinquent since June of last year, and that's not true. "
Write everything down
Christine Holevas, a spokeswoman for Chase, said her institution is glad to have helped McIntosh and apologized for his frustrations.
"We are trying very hard to help struggling borrowers stay in their homes, whenever possible,'' Holevas wrote in an email. "We have experienced unprecedented volumes of applications during the past years, but throughout that time we have continued to improve and enhance our systems.''
Holevas said the main challenge continues to be completing timely submitted document packages.
Holevas said that in addition to more than 6,000 telephone loan counselors, Chase has opened 51 homeownership centers across the country where individuals can meet face-to-face with loan counselors about their mortgage issues. The centers are located in areas that have the highest rates of loan defaults; none is in St. Louis.
After making it through the modification process, McIntosh say he now faces a challenge making his monthly payment to Chase -- not because he can't afford it but because the company will only accept his payment through a certified check. And, he says, he is still ironing out some last details regarding the way the company has applied payments to his account.
"It appears from my end that Chase was completely unprepared for what was coming,'' he said. "It's why I got a lot of bad information. It's why it took them months longer than it should have. It's why I've spent hours and hours on the phone with them trying to sort out their business.''
His advice to other homeowners in the modification process: Stay calm. Be persistent. Don't take it personally. And write everything down.
"I'm a licensed clinical social worker,'' he said. "I know that if you don't write it down, it didn't happen."
