Foreclosure Overhaul Comes Too Slowly For Many Homeowners

The biggest U.S. banks are still foreclosing on homeowners who qualify for new loans, according to a coalition of non-profits. That's despite settlements aimed at preventing unnecessary foreclosures.

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And the nation's largest banks are still foreclosing on too many homeowners. That's according to a report out this morning from a coalition of 300 non-profits in California, a coalition that advocates for access to financial services for people in low-income and minority communities. The report also finds that banks and other firms are improperly rejecting homeowners who should qualify for programs to lower their mortgage payments.

NPR's Chris Arnold reports.

CHRIS ARNOLD, BYLINE: Bank of America, JPMorgan Chase, Wells Fargo and other banks in recent years paid billions of dollars in settlements related to improper foreclosures. And they also agreed to reforms. But according to this new report, these banks are still making mistakes and foreclosing on people when they shouldn't be.

KARYNN KELLY: Greg died here at the house.

ARNOLD: KaRynn Kelly is showing us around her house in Oakland, California. Her ex-husband Greg passed away last summer. He had cancer. And she moved back into the house to care for him with their 24-year-old son Ian. It turned out that Greg hadn't told them until he was near-death that he'd fallen behind on the mortgage.

KELLY: This has been the family home, and I know that he died saying that I don't want you guys to be out on the street.

ARNOLD: KaRynn Kelly and her son both have jobs. She's an administrative assistant at Lawrence Berkeley National Laboratory, and together, they make about $85,000 a year. So, her housing counselor says that they're good candidates for a loan modification through JPMorgan Chase, their loan servicer, so they could afford to stay in their house with a lower payment. And that's what they've been trying to do.

KELLY: Ian and I would both submit our paystubs - oh, and our bank statements, and utility bills - and Chase representatives, they would be in different states, and they would cross over each other and say, well, I didn't get the documents.

ARNOLD: That's dragged on for six months. Meanwhile, she says the bank sent them foreclosure sale notices, and people have been coming around the house to peek in the windows, rattling the doorknobs, trying to check the place out so they could put in a bid at auction.

KELLY: I mean, it was extremely frightening, because, you know, not only are you frustrated and still grieving, now you're trying to figure out, you know, are these people going to break into the home?

ARNOLD: For years, there have been these complaints about banks or other firms that service home loans losing documents, taking forever. Meanwhile, the foreclosure gears crank forward, and people lose their homes. Legal reforms and settlements were supposed to fix these problems...

LISA SITKIN: There certainly have been improvements, but to this day, we continue to have issues even at the most basic level.

ARNOLD: Lisa Sitkin is an attorney who works with the California Reinvestment Coalition, which just came out with this report. She says, for example, once a homeowner applies for a loan modification, the bank has to suspend all foreclosure proceedings until the person's been given a proper review.

SITKIN: There are some strong laws and if the servicers go ahead with foreclosure - any stage of it, really - when there's an application being reviewed, they are breaking, in many cases, both federal and state law.

ARNOLD: But Sitkin says that still happens, as it did with KaRynn Kelly, who's her client.

SITKIN: I had to send urgent notices to various people - I just happened to have those contacts at Chase - to get the sale postponed, and that should have been automatic. There shouldn't have been any need for me to intervene.

ARNOLD: JPMorgan Chase said in a statement that the bank has suspended all foreclosure activity on the house. The bank also pointed out that it did a prior loan modification for KaRynn's ex-husband. Chase says it has thousands of employees working to help homeowners. In addition, a separate recent report from regulators said that banks and servicers have made progress. But, Lisa Sitkin says, there are still too many mistakes.

SITKIN: And I still have borrowers who get denied. I had one just last week, because the bank miscalculated their income, which, to me, is always sort of shocking, since I think the one thing the banks should be able to do is count somebody's income, right?

ARNOLD: The new report calls upon regulators to do a better job of enforcing recently foreclosure reforms. Chris Arnold, NPR News.

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