The Obama administration announced a new program they call “The Mortgage Modification Conversion Drive” which seeks to pressure mortgage servicers into converting all their “trial” loan modifications into a permanent restructuring of the mortgage.

Good Luck…is all I have to say.

I have written extensively on the mortgage servicers / lenders whose only desire when it comes to loan modifications is to foot-drag, stall, or otherwise buy time. Their first line of defense here is to not answer their modification phone lines. Next, is to require a massive amount of paperwork from the troubled borrower to even consider a loan mod. Following this, the borrower will be asked to resend this paperwork upward of 7-10 times claiming each time something was missing. If the borrower is persistent - and I mean PERSISTENT - it can take almost a year to get approved for a “trial modification”.

What Is A Trial Modifcation?

A trial mod is just another stall tactic where the borrower is asked to come current usually (costing $1,000s) and then pay on a temporarily reduced rate for 3-4 months to see if he can “make it work”. The “lost interest” from the reduced payment is tacked on the loan balance, so the bank technically is not changing the terms of the mortgage. The implied belief is if the borrower can make that trial payment those changes will be made permanent with an actual restructuring of the mortgage note.

Yes…I said “implied belief”. Nothing is put in writing. You just have to trust them!

Laughable…I know.

If you read any of the comments on any of the servicing companies we have here, you’ll quickly see foreclosure victims are not getting their permanent modifications after a successful trial mod.

Big surprise…right?

The Obama Mortgage Modification Conversion Drive

So, now the Obama administration is attempting to right this wrong with a new program and you can read all about it here.

Treasury spokeswoman said in a press release,

“We are encouraged by the pace at which trial modifications are now being made to provide immediate savings to struggling homeowners,” said the new Chief of Treasury’s Homeownership Preservation Office (HPO), Phyllis Caldwell. “We now must refocus our efforts on the conversion phase to ensure that borrowers and servicers know what their responsibilities are in converting trial modifications to permanent ones.”

The crux of the program according to the website is the following:

  • Top servicers will be required to submit a schedule demonstrating their plans to reach a decision on each loan for which they have documentation and to communicate either a modification agreement or denial letter to those borrowers. Treasury/Fannie Mae “account liaisons” are being assigned to these servicers and will follow up daily as necessary to monitor progress against the servicer’s plan. Daily progress will be aggregated by the end of each business day and reported to the Administration.
  • Servicers failing to meet performance obligations under the Servicer Participation Agreement will be subject to consequences which could include monetary penalties and sanctions.
  • The December MHA Servicer Performance Report will include the data on permanent modifications as well as the number of active trial period modifications that may convert by the end of the year if all borrower documents are successfully submitted, sorted by servicer and date.
  • Servicers will be required to report to the Administration the status of each modification to provide additional transparency about situations where borrowers face obstacles to moving to the permanent phase.

    • Like all government “programs” this or any other administration develops to help foreclosure victims…the proof is in the pudding.

    So far none of them have any real sanctions for foot-dragging or a review process to see if those denied were denied on merit or whether a profit motive played a part in the decision.

    Believe me when I tell you, most foreclosure victims with equity are pretty chapped when they get denied for a even a trial mod when their next door neighbor without equity is approved. I know it doesn’t prove anything, but it sure looks suspicious…and proves the need for oversight.

    One Ray of Sunshine

    This new program comes with a new resources to inform seekers of trial and permanent mods about the process and paperwork. Contact the MakingHomeAffordable.gov website or the Homeowner’s HOPE Hotline (888-995-HOPE) to find these new tools.

    Lastly, keep fighting. Don’t fall for the stall tactics. Use these new resources and send in the paperwork as many times as they ask for it. Who knows…maybe this time the banks’ stall tactics will backfire and you’ll get a permanent payment you can afford.

    Good Luck!

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