BofA says it will meet goals under Obama foreclosure plan

The big banks that provide customer service on most U.S. home loans had egg on their faces in August, when the U.S. Treasury reported that they had made little progress toward modifying mortgages under President Obama’s then-newly implemented anti-foreclosure program.

The No. 1 servicer, Bank of America Corp., was the slowest of all to generate what the administration called Making Home Affordable modifications. Bank of America had offered three-month trial modifications to just 4% of the customers deemed likely to qualify, compared with 9% for all servicers combined, the Treasury announced.

The Treasury is set to release its third monthly report on the program Thursday. And this time, Bank of America says that it has gotten up to speed and will meet an Obama-set goal of starting 125,000 trial mortgage modifications by Nov. 1. (In all, the company services 14 million home loans.)

Bank of America, including the Countrywide Home Loans operations it acquired last year, had started more than 27,000 Obama-style trial modifications as of the end of July. That number reached 59,000 by the end of August, about 95,000 as of Sept. 30, and is now well above 100,000, said Steve Bailey, the bank’s home-retention strategies executive.

"Obviously, we’re feeling pretty good about the program," Bailey said.

Before the federal foreclosure-prevention plan emerged, Bank of America already was doing loan modifications to comply with its settlement of lawsuits brought against Countrywide by state regulators.

That program involved lowering and suspending interest payments, as well as extending the payback time on certain subprime and exotic loans. The goal was to get first-mortgage payments down to 34% of borrowers’ incomes.

The Obama program introduced some twists, including bonuses for borrowers who stay current on loans and paying servicers to reduce the first-mortgage payments (including taxes and interest) down to just 31% of borrowers’ gross earnings.

It also mandated the three-month trial modifications, during which time borrowers would prove they could make the lower payments and provide additional documentation before qualifying for long-term loan restructurings.

Bailey said Bank of America had done hundreds of thousands of modifications outside the Making Home Affordable plan, although the federal program is its first alternative these days.

It wasn’t possible to obtain details Wednesday on how modifications are going at mortgage rivals Wells Fargo & Co. and JPMorgan Chase & Co.

But there should be a lot more information Thursday in the Treasury report, which presumably will be posted on the department’s press release site.

-- E. Scott Reckard

Tips to avoid loan modification scams

The Federal Trade Commission has teamed with local and state authorities in a nationwide crackdown on loan adjustment scams, as reported in the Business section of The Times.

But one of the biggest challenges the FTC and its allies are up against is reaching homeowners looking to stave off foreclosure before the scammers reach them and dupe them, promising mortgage modification services that they never deliver.

The FTC produced a video on how to avoid scams as part of its inter-agency crackdown, dubbed "Operation Loan Lies," which can be watched and downloaded at www.ftc.gov/YourHome, or below.



The FTC's video, "Real People, Real Stories," is also available in Spanish, which can also be seen below.



For those seeking to lower their monthly home loan payments, here are some tips on avoiding scams. The suggestions come from the FTC and the office of California Atty. Gen. Jerry Brown:

• The first thing anyone seeking to modify an existing loan should do is call his lender.

• Lenders want to hear from homeowners and will probably be more willing to work directly with them than with a foreclosure consultant. Do not ignore letters from your lender. Many lenders are willing to work with homeowners who are behind on their payments.

• Contact housing counselors approved by the U.S. Department of Housing and Urban Development, who may be able to help you for free. For a referral to a housing counselor near you, contact HUD at (800) 569-4287 or www.hud.gov.

• It is illegal for foreclosure consultants to demand money before they give you a written contract  and before they actually perform all the services described in the contract, such as negotiating new monthly payments or a new mortgage loan.

• However, an advance fee may be charged by an attorney, or by a real estate broker who has submitted the advance fee agreement to the California Department of Real Estate for review.

• Do not transfer title or sell your house to a "foreclosure rescuer." Fraudulent foreclosure consultants often promise that if homeowners transfer title, they may stay in the home as renters and buy their home back later.

• Fraudulent foreclosure consultants claim that transfer is necessary so that someone with a better credit rating can obtain a new loan to prevent foreclosure. Beware -- this is a common scheme so-called rescuers use to evict homeowners and steal all or most of the home's equity.

• Do not pay your mortgage payments to someone other than your lender or loan servicer, even if he or she promises to pass the payment on. Fraudulent foreclosure consultants often keep the money for themselves.

• Do not sign any documents without reading them first. Many homeowners think that they are signing documents for a new loan to pay off the mortgage they are behind on. Later, they discover that they actually transferred ownership to the "rescuer" who is actually a scammer.

Homeowners who think they have been ripped off can file a complaint with the California Department of Real Estate through their website here. The department also offers tips on how to avoid getting scammed and what to do if you think you've been scammed here.

Complaints can also be made directly to the FTC by phone at (877) 382-4357, the FTC's Headquarters or Financial Services Division in Washington, D.C., at (202) 326-2222. The FTC also has regional offices; in San Francisco at 901 Market St. and in Los Angeles at 10877 Wilshire Blvd.

HUD can set up homeowners with personalized guidance from housing counseling agencies they've certified at (888) 995-4673. More information on how to find free certified counseling services is available at HUD's guidance website at www.hopenow.com or the Obama Administration's website loan modification website, www.makinghomeaffordable.gov.

-- Nathan Olivarez-Giles

Are loan modifications merely postponing default?

Consumer advocates expressed some skepticism today about a Fitch Ratings study predicting a high redefault rate for mortgages that are restructured to avert foreclosure.

The study, which I wrote about in today's Times, looked at mortgages bundled up on Wall Street during the housing boom to back debt securities. It projected that 65% to 75% of subprime mortgages in these loan pools would be at least 60 days delinquent within a year of when they were modified.

Center for Responsible Lending officials said the study doesn't adequately account for the more drastic lowering of payments expected as Obama administration loan-mod programs kick in. The buzzword here is "sustainability" -- getting the loan payment to a level at which the borrower can realistically be expected to afford it over time.

The Obama programs aim at persuading lenders and loan investors to reduce payments on first mortgages to 31% of a borrower's income. The initiatives include financial incentives for mortgage customer-service firms to accomplish this by lowering interest rates, extending loan terms and sometimes suspending interest payments on part of the principal of the loan.

"The Fitch report applies to non-Obama plan mods," Center for Responsible Lending spokeswoman Kathleen Day said in an e-mail. "So this just shows the need for real sustainable mods."

Any thoughts on whether Fitch was overstating the potential problems?

-- E. Scott Reckard

Wells CFO: California economy close to bottom

Wells Fargo, the San Francisco banking giant, is sounding more bullish on the California housing market – at least compared with places like New York, where the downturn began later.

“It’s premature to say the economy has bottomed out,” Wells’ chief financial officer, Howard Atkins, said in an interview this morning as the bank reported record earnings.

 “But clearly there are signs that indicate to me we are closer to the bottom,”  Atkins said. “Some of that is in the housing sector. With interest rates so low, we are seeing volumes picking up, even in California – not just refinancings, but home purchases.”

Because California’s housing market collapsed earlier than many other states, “it will come out earlier. New York is definitely still  declining,” Atkins said.

Wells' first-quarter statistics showed $1.6 billion in revenue from mortgage loan originations and sales on $101 billion in new home loans. That put it ahead of Bank of America Corp. as the biggest originator.

There were $100 billion in additional mortgages in the pipeline at the end of the first quarter, up 41% from the previous quarter, Wells said.

Atkins said that Wells has added 5,000 mortgage employees to handle the surge caused by rates in the 5% range for 30-year fixed-rate loans. Given the backlog of pending home loans, they’ll be kept busy at least through the end of this quarter, he said.

Bank of America also recently said that it is adding 5,000 employees to handle the huge volume of loans.

Atkins’ comments came as Wells released first-quarter earnings. As the bank pre-announced April 9, its profit was about $3 billion before dividends to preferred shareholders. After dividend payments – including $372 million owed on $25 billion in taxpayer bailout funds – it earned $2.38 billion.

A year earlier, Wells had turned a profit of $2 billion. But in the fourth quarter it lost $2.7 billion.

-- E. Scott Reckard