Obama housing fix: Banks not ready

Loan servicers are still working to start federal mortgage plan. Meantime, borrowers can use a new U.S. Web site to determine if they are eligible.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Tami Luhby, CNNMoney.com senior writer

What progress is the Obama administration making toward ending the recession?
  • It's succeeding
  • The recovery is too slow
  • It's not helping at all

NEW YORK (CNNMoney.com) -- As loan servicers scramble to implement President Obama's foreclosure prevention plan, the administration on Thursday unveiled a Web site to assist homeowners in determining whether they are eligible for help.

Obama rolled out his $75 billion foreclosure prevention program on Feb. 18, saying it would begin two weeks later when financial institutions received the guidelines.

The two-part Obama plan calls for servicers to reduce monthly payments to no more than 31% of eligible borrowers' pre-tax income or to refinance eligible mortgages even if the homeowner has little or no equity. It also provides thousands of dollars in incentives for servicers and borrowers to participate.

Servicers, however, are still updating their systems to process modification and refinancing applications. And they are waiting for clarification on a few points of the president's plan.

It could be weeks before borrowers learn whether they qualify for either program. Many have complained about being turned away by their servicers.

Administration officials reiterated the need for borrowers to be patient as the servicers work to implement the program. The nation's four major servicers -- Citigroup (C, Fortune 500), Bank of America (BAC, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Wells Fargo (WFC, Fortune 500) -- have said they would participate.

"They are moving as fast as humanly possible," a senior administration official said Wednesday in a discussion about the government's new Web site.

The site can be found at makinghomeaffordable.gov.

Contact your servicer

Some financial institutions, while still not processing applications, are encouraging borrowers to contact them and submit their paperwork. That way homeowners can learn whether they qualify soon after the systems are in place.

Bank of America, for instance, is collecting borrowers' information. If it's clear they aren't eligible for the Obama plan, the bank looks to help them through one of the other loan modification programs already underway. If they might qualify for the president's program, Bank of America is compiling taking down names for future follow-up.

"As soon as we're ready, we'll make calls to the people who've already contacted us," said Rick Simon, a Bank of America spokesman.

Citigroup, meanwhile, is already modifying mortgage payments to no more than 31% of borrowers' monthly income, as part of its November bailout from the federal government.

"We anticipate that the modifications we are making will qualify under the Obama plan once the details are finalized," said Mark Rodgers, a Citigroup spokesman.

Servicers are encouraging borrowers to collect the financial information needed to determine eligibility.

"We're also asking our customers to gather the necessary documents so that when our systems are up and running, we can begin quickly to help those who will likely qualify," said a Wells Fargo spokeswoman.

Determining eligibility

The administration's new Web site helps homeowners determine whether they might qualify for either a loan modification or refinancing. It also provides links to finding government-approved housing counselors and warns people to avoid foreclosure rescue scams.

Borrowers can answer a set of questions to learn whether they could benefit from either the Obama modification or refinancing programs. The loan modification interactive tool, for instance, asks whether the borrower lives in the home, has a mortgage of less than $729,500 that was originated before Jan. 1 and is having trouble making payments.

The site also helps homeowners determine whether their monthly payments are more than 31% of their pre-tax income. And it gives an estimate of how low their new payment might go under the plan. For example, if you earn $4,000 a month and pay $1,400 a month, you could see your payments drop to $1,240 under the modification plan.

The refinancing tool, meanwhile, provides links to Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) that let borrowers determine whether they have loans held by either mortgage finance company, a key eligibility criteria.

Borrowers will also find a checklist of financial documents -- including pay stubs, tax returns and credit card statements -- that they will need to present when applying for the program.

The administration estimates that its foreclosure prevention fix will help up to nine million homeowners.

"We want to encourage as many eligible borrowers as possible to take advantage of our program," said a senior administration official. "This site encourages borrowers to investigate if they are eligible for one or both programs." To top of page

Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
10 of the most luxurious airline amenity kits When it comes to in-flight pampering, the amenity kits offered by these 10 airlines are the ultimate in luxury More
7 startups that want to improve your mental health From a text therapy platform to apps that push you reminders to breathe, these self-care startups offer help on a daily basis or in times of need. More
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More
Sponsors
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.