Mortgage modification can be a paper chase

Many homeowners become caught in a bureaucratic paper chase when they try to change the terms of their mortgages.

Those in danger of falling behind on their payments or facing foreclosure can apply to lenders for lower interest rates, a longer-term mortgage or other modifications.

But borrowers, lenders, government officials and debt counselors confirm that lost paperwork on modification applications has been a chronic problem since the collapse of the housing market in 2007.

Lost or incomplete documentation is the main reason borrowers are denied trial loan modifications, according to the most recent report from the U.S. Treasury Department, which runs the federal homeowner rescue program.

'Never got the papers'

As a result, borrowers are pushed closer to foreclosure as they futilely resend papers for modifications, only to be told that the documents never reached their case files.

For more than a year, West Babylon homeowner Carmen Thomas has been sending mortgage modification papers to her bank and hearing repeatedly, "We never got the papers."

"It's like you're kidnapped," she said, "and no one's going to release you."

There are no official numbers on how many people experience the paper mess. But the Community Development Corp. of Long Island, a nonprofit that has counseled more than a thousand borrowers on loan modifications, estimates that when the housing collapse started, nine out of 10 modification applicants had problems with lost paperwork. Three years later, that estimate is down to four out of 10.

Lenders, federal officials and nonprofit counselors said it has dropped because of changes in the process. In June, Treasury streamlined the application. And a year ago, lenders and nonprofits set up a computer tracking system for modification papers, a tool that expanded last month on the Island.

"The paperwork process has been more of a struggle for both servicers and homeowners than anyone expected," said Treasury spokeswoman Andrea Risotto. "Treasury continues to emphasize to servicers that they must improve customer service."

Lenders acknowledge they were buried in papers and requests for help as they switched resources from making loans to modifying them. Lately, if all goes well, homeowners can get trial modifications, then permanent ones in as little as four months. But a glitch can delay decisions for a year or more.

More than two years ago, Earline Milligan of Huntington sent a modification application to a Chase office in California. About a month later, she said, an Arizona-based representative asked why she hadn't submitted anything. She then took a day off to deliver papers to the Chase Homeownership Center in Flushing and later still faxed the requested documents.

But around Christmas, her contact at the center asked why she hadn't sent in requested documents, only to call back the same day to say they were there, Milligan said.

Chase declined to comment on individual cases, citing privacy rules, but said it has addressed the paper-handling issue, including scanning all papers into a computer database.

Fault hard to determine

Larry Gilmore is the head of Hope LoanPort, a tracking system that Chase uses, launched a year ago to scan in papers and manage cases. He said borrowers often get inconsistent answers because they get different departments and people with various levels of access to files. "In many cases, it's hard to determine who's at fault," Gilmore said.

Most major banks and loan servicers - including Wells Fargo, Bank of America, and Citibank - have signed up for LoanPort. Some have doubled staff handling applications.

For example, Chase has opened 51 of its homeownership centers for borrowers to meet advisers, and it gives each applicant a single "relationship manager" as the primary contact, said spokesman Michael Fusco. "We've taken these steps to make sure it's not as big of a problem," he said.

But some borrowers still give up, said Joanie LaFemina, head of homeowner services at Community Development Corp. of Long Island in Centereach.

"That's what happens when they get these roadblocks and these constant hurdles," LaFemina said. "Then the bank says, 'Well, we tried to contact them prior to foreclosing.' "

Loan Modification Tips

These tips will help ensure your loan modification papers get into your lender's file:

Make sure to send a complete loan modification application and set of supporting documents, with signatures everywhere needed.

Write the name and loan number on every document sent and the page number on every document mailed or faxed.

List on the fax cover sheet each document being sent and its page number.

Report problems to helpwithmybank.gov/complaints, the site for the federal Office of the Comptroller of the Currency, which governs federally charted banks and which will refer complaints to the correct agency.

Get help at a nonprofit that has signed up for Hope LoanPort (hopeloanportal.org, a system that allows lenders, servicers and nonprofits to scan in papers and manage cases online.

Keep a contact log with names of representatives, dates of conversations and copies of fax cover sheets and other documentation that may help if the property goes to foreclosure court.