Are Settlement With Banks Helping Homeowners?

Banks have granted tens of billions of dollars in mortgage relief through settlements, the latest being JPMorgan Chase, which agreed to provide an additional $4 billion for troubled homeowners. But housing counselors around the country say that not enough has changed, and that the settlements, while a good template, aren't what is making a difference in communities hard-hit by foreclosure.

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Banks have spent tens of billions of dollars modifying or forgiving loans for struggling homeowners, the latest being JPMorgan. Last month, they agreed to pay an additional $4 billion to help troubled borrowers and neighborhoods as part of a larger settlement with the Justice Department. But housing counselors around the country say all this money isn't making much of a dent in the problems they see. NPR's Yuki Noguchi spoke with some of them and has this report.

YUKI NOGUCHI, BYLINE: This year, the Community Housing Development Corporation in Richmond, California, will try to help 600 homeowners who are seeking lower mortgage payments from their banks. Ffely Charun, a senior housing counselor with the group, says getting a loan modified is still a grinding process that can drag on for months, if it even succeeds.

FFELY CHARUN: My current success rate is about 12 percent.

NOGUCHI: And is that good?

CHARUN: It's better than the national. I think the national was 10 percent.

NOGUCHI: Overall, would you say the process has gotten any less frustrating than it was a few years ago?

CHARUN: A little bit.

NOGUCHI: A few years ago, when I spoke to counselors like Charun, they often made it sound like getting a bank to modify a loan was like clawing out of a rabbit hole with your arms and legs tied. You never knew where you were, no one seemed to hear your cries for help, and you had no control. Now, Charun says, she's seen modest progress. There's an online portal where documents are submitted, so banks lose them less often. There's also supposed to be a single point of contact, although if the mortgage is sold, she says that tends to go out the window.

CHARUN: That whole system is still very frustrating. It's not as easy a system as when you are, let's say, originating a mortgage and getting a loan. I mean, they get that done in 30 days and close and fund. I don't understand why this has been going on for so long and they still can't get it right.

NOGUCHI: That's in spite of a $25 billion settlement with state attorneys general last year. That deal required five big banks to modify or forgive loans and change the way they handle loan modifications. The banks satisfied the monetary requirements ahead of schedule. But today, the independent monitor overseeing that settlement said banks continued to fail tests gauging improvement in their loan modification processes.

VERONICA RAPHAEL: They refuse to make them easy to obtain.

NOGUCHI: Veronica Raphael is director of foreclosure prevention at Westchester Residential Opportunities outside of New York City. She says exactly three of her group's clients qualified for modifications as a result of the attorneys general settlement - great for those individual borrowers, but not nearly enough to help the community at large. And although housing prices are increasing nationally and the foreclosure rate is declining, Raphael says her active caseload of 360 keeps growing.

RAPHAEL: There's been an increase in the amount of applications we've been receiving.

NOGUCHI: Do you feel like banks are more willing to talk about principal reduction and loan modification?

RAPHAEL: No. No.

NOGUCHI: She says one of the primary problems is that borrowers fall further and further behind on payments while they wait for the bank to approve a modification. Eventually, they fall so far behind, they can't afford even a modified loan.

RAPHAEL: The delinquent balance is so high that it becomes unaffordable for the homeowner to get a modification over 40 years, which is the maximum that they offer.

NOGUCHI: Some decided the whole mortgage modification business was too onerous and contentious to bear. Rob Breymaier is executive director at Oak Park Regional Housing Center near Chicago. Two and a half years ago, when I met him, his group was still trying to help homeowners avoid foreclosure. Then they gave up.

ROB BREYMAIER: In addition to the time we were spending for the very little reward that we were getting for clients, you know, it was so hard on the counselors. They would, you know, have to deal with people crying in front of them constantly because they were losing their homes. And it was a drain on the morale of the organization, as well. That is OK if in the end you can get something for the clients, which is what you're here for. But in so many cases we couldn't.

NOGUCHI: Now, Breymaier says his group is focused on educating homebuyers. He says they figure the better way to help their community is to try to prevent the next foreclosure crisis from happening.

Yuki Noguchi, NPR News, Washington.

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