Courtesy of Los Angeles Neighborhood Housing Services
A HUD-certified counselor teaches a foreclosure-prevention clinic in Los Angeles.
A HUD-certified counselor teaches a foreclosure-prevention clinic in Los Angeles. Courtesy of Los Angeles Neighborhood Housing Services
The Obama administration has begun doling out the first chunk of $75 billion to several banks nationwide to help struggling homeowners stay in their homes. The funds are part of a new program called Making Home Affordable. The administration expects lenders to use the money to offset the cost of modifying millions of home loans. But some lenders are moving slowly.
In a packed third-story conference room that looks out on the skyscrapers of Los Angeles, all eyes are on Larry Reed, a counselor for Los Angeles Neighborhood Housing Services.
The people assembled have seen pink slips, unpaid mortgages and notices of default. They're now looking at Reed with a hint of desperation.
"So there's no embarrassment, no shame and no guilt. Bad things have happened to good people in this economy," he says. "For those of you who haven't figured it out, today is the first day of your financial life."
Reed is full of zingers like this. This tough, headmaster approach is balanced by his teddy bear appearance. He's teaching a class on how to prevent foreclosures.
Next door, dozens of homeowners talk to housing counselors. Counselor Yolandra McClinton looks over Brian and Dorothea Wang's tax forms. The couple is hoping to apply for a loan modification under the Making Home Affordable plan.
The couple both own two small businesses. Brian Wang is a personal chef and Dorothea Wang is an author of children's books.
They haven't been able to pay their mortgage since January. And they're about to default on their loan with Wells Fargo.
The Wangs say they've called and called and left messages with the bank, but nobody's returning their calls.
"I faxed my loan-modification application six times to the two banks and everybody keeps saying, 'We didn't get your application yet, we didn't get your application yet,'" Dorothea Wang says.
"Unfortunately, that's a true story and I hear it all the time," McClinton says, "because they're overwhelmed."
Wells Fargo just received $3 billion from the government under the Making Home Affordable program.
Ed Delgado, senior vice president of default and retention operations at Wells Fargo Home Loans, says the company has been busy getting up to speed with the new program.
He says it's taking time to roll out "decisioning" software used to determine eligibility for the program. Other delays, he says, are caused by borrowers who aren't providing correct documents.
The basic requirements for a loan modification are living in the home you own and proving that you're spending more than 31 percent of your monthly gross income on your mortgage payment.
Delgado says Wells Fargo customers who are eligible for a loan modification would typically see their interest rate reduced for a minimum of five years.
Still, Lori Gay, president of Los Angeles Neighborhood Housing Services, says many lenders are too busy handling more serious matters like foreclosures to focus on loan modifications.
"Are they ready to make this a massive program yet, or do they need three months to get their systems in place?" she says. "This is where people get lost in the cracks."
That's what millions of vulnerable homeowners are worried about as they navigate this new federal program.
Rob Schmitz reports for member station KQED.