Mortgage modifications were going to help up to four million Americans save their homes, remember? That was the claim of the Obama Administration when it announced its Making Home Affordable program in early 2009. Yet more than three million applications later, only about 100,000 mortgages have actually been modified under the widely-vilified program. But what about those 100,000, the lucky folks who actually had their terms modified? For my friend Ralph, it is a story with a happy ending.
Ralph has been out of work since last spring, laid-off from his job in the financial services industry. With kids in college, no job, and both a first and second mortgage, Ralph needed a break. What worked for him was a good credit history, money in the bank, willingness to work with the system, and patience, lots of patience. Your mileage may vary.
It may have helped, too, that both of Ralph's mortgages through Countrywide Financial (now part of Bank of America) were actually owned by Fannie Mae and may well have been written-down by the now-nationalized mortgage securitizer.
"It was easy, " says Ralph, "though it took a lot of time. Bank of America services the loans but Fannie Mae owns them. It might have been harder if the bank owned the loan and saw it as their money. They asked me about my income, which came down to unemployment and my wife's business selling on eBay. They asked for a P&L statement for the eBay business, which was just a matter of printing-out a spreadsheet, then they adjusted our payment to 31 percent of my wife's net income, which came to an interest rate just slightly over two percent. Our payment was cut in half."
It helped that Ralph had the documentation requested by the bank, though he notes they did not require any verification -- no tax returns, just the P&L. Ralph also had to make it through the trial modification period, which just meant he had to make the new payment for three months before the rate became permanent.
So there are mortgage modification success stories, just not many of them. In Ralph's case his payment was cut in half for the next five years and that rate will stick even if he gets another high-paying job.
For now, Ralph is still looking.
