A solution to the modification run around? (Chicago Now)

By Angela Caputo

May 3, 2010

Earlier this spring, we reported on the runaround that that Chicago-area homeowners have been getting from their lenders as they seek approval for mortgage modifications under the federal Home Affordable Modification Program. First, the setup:

Through interviews with national and local housing experts and counselors, the Reporter found that banks are understaffed and inundated with applications, making some homeowners wait up to nine months to find out if they've been approved. In other cases, banks have routinely lost homeowners' paperwork, forcing them to apply numerous times, or bank employees have incorrectly entered income data, disqualifying applicants. In addition, some banks are beginning the legal foreclosure process as they weigh whether to approve customers' loan modification applications. Some people have been lucky enough to get approved for a temporary loan modification only later to find out that it will never become permanent.

As a result, a mere 22 percent of all Chicago-area modifications have become permanent since the program was launched in 2009, according to the latest analysis by the Woodstock Institute.

Encouragingly, a piece of state legislation that recently passed through both chambers in Springfield--and is now headed for Gov. Pat Quinn's desk--could finally make this process more transparent and effective for Illinoisans. Under state Rep. Deborah Graham's Foreclosure Loss Mitigation measure, HB 5735, banks will have to prove that they've attempted to process these modification applications before they can settle foreclosure cases. As the Woodstock Institute's Katie Buitrago told me earlier this spring, the measure has the potential to boost long-term modification prospects in the future "because banks might not lose so many applications or sit on them so long that they're no longer relevant."

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