In 2008, Southwest Airlines flight attendant Kevin Parker slammed his shoulder so hard during severe turbulence that he was out of work for months.
His lender, Bank of America, allowed him to skip payments on his St. Petersburg home for 90 days. But when Parker sought a permanent loan modification, he began a journey as bumpy as anything he had encountered in the air.
"I sent the first e-mail probably last February and didn't get a response, so I started e-mailing every other day trying to talk to someone,'' Parker says. "Then it seemed like every time I called them, I was turned over to another caseworker who didn't have the information I had sent.''
Five months and some 40 e-mails and phone calls later, Parker got the bank to reduce his payments by about $126 a month. But there was a big tradeoff: His late payments were tacked onto the balance, increasing the amount he owes to $157,805 — $10,300 more than he originally borrowed.
"I'm back to work but I'm paying more for the house than it's worth now and they (Bank of America) weren't willing to just pick back on the principal.''
Parker's laments are not unusual among customers of Bank of America, the nation's biggest bank.
A year ago, the Treasury Department announced the Home Affordable Modification Program, aimed at helping up to 4 million at-risk homeowners avoid foreclosure by reducing their monthly payments. Banks receive $1,000 for each modification and up to $1,000 a year, for as many as three years, as long as the borrower remains current on payments.
Even with those incentives, Bank of America has ranked near the bottom when it comes to modifying loans for homeowners delinquent at least 60 days. Through January, 22 percent of the bank's eligible borrowers had received permanent or three-month trial modifications, compared to 38 percent for J.P. Morgan Chase and 50 percent for GMAC and CitiMortgage.
The Florida Attorney General's Office says it has fielded 486 complains about Bank of America and a company it took over, Countrywide — more than it has about any other lender. Many of the gripes are from homeowners who have been unable to get modifications despite repeated contact with customer service reps who lose paperwork, give conflicting information or ignore them altogether.
But even those like Parker who get help could be worse off in the long run because the amount they owe has grown while property values continue to fall. With no equity in their homes, many people may just walk away, critics warn.
"Modifications that work are a permanent reduction in principal and interest, and some lenders are doing those but Bank of America is not,'' says Alan M. White, a professor at Valparaiso University School of Law and an expert on housing issues.
"It's pretty clear that Bank of America and Countrywide, now one entity, are just unwilling to do modifications on the scale that's needed. Somehow they're hoping against hope that property values will suddenly come back.''
Bank of America, which had a $6.3 billion profit last year, says it has found that reducing interest and extending the life of the loan are the most effective ways to make payments affordable.
It also says that the volume of Florida complaints is misleading because many probably came from homeowners whose loans originated with Countrywide, once a leader in particularly risky forms of loans.
"When you hear Bank of America complaints, it's really hard to decipher if it's against a Bank of America-originated loan or a Countrywide loan,'' says Jumana Bauwens, a bank spokesperson.
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During the real estate mania, Bank of America itself was a major lender in Florida, including the Tampa Bay area. Thousands of those loans have gone into default, though very few bay area homeowners have obtained relief through modifications, court records show.
From 2005 to 2008, the bank issued 62,000 mortgage loans in Pinellas and Hillsborough counties. Since then, it has started foreclosing on more than 4,000 loans.
Last year, though, the bank recorded modifications on only about 50 home mortgages in the two counties.
Not every delinquent homeowner was eligible for a modification. But for those who were, patience and perseverance often proved essential.
In 2006, Martha Kramer borrowed $116,000 from the bank to buy a Largo condo. After losing her property manager's job and missing three payments, she asked for a modification.
"Every time I called, I talked to four or five people. I was on the phone two hours at a time, getting transferred to another department, repeating the whole story again. People were very nice but they were clueless. The right hand didn't know what the left was doing.''
Kramer says it was" easily a year later'' — April 2009 — before she got a modification that reduced the interest rate and almost halved her base payment to $525 a month. "I can deal with it,'' says Kramer, who is still unemployed.
But the new terms will make it even harder for her to build equity. The bank tacked part of the late fees onto the principal, meaning she now owes $116,880 on a condo worth about $100,000. And to keep the payments relatively low, the loan is for 40 years, not the once-typical 30 years.
"If they stretch it out further, that's sort of helping you in that it reduces the monthly burden,'' says Arnold Heggestad, a University of Florida finance professor. "But unless housing prices start coming back, it's not going to do much good in the long run.''
Through January, lenders reported that 28 percent of eligible homeowners nationwide had received permanent or trial modifications in which interest rates were lowered, terms extended or — more rarely — the principal reduced. Bank of America and other lenders have been criticized for stinginess in reducing loan balances, a move that could give homeowners instant equity and more incentive to keep making payments.
By some estimates, 20 percent of American homeowners now owe more than their property is worth.
Bank of America says it is considering "principal forgiveness'' for certain types of loans, especially those inherited from Countrywide in which payments rose even as housing prices plunged.
Under an agreement with the Florida Attorney General's Office, the bank has modified more than 12,700 of the Countrywide loans in Florida. It has also increased the number of customer service representatives in the state.
Given his hassles getting a modification, Parker, the fight attendant, says he probably would have let Bank of America foreclose if he hadn't put so much time and money into restoring his 1920 Mediterranean-style bungalow. Though his payments dropped, he owes the bank more than he used to. And the interest rate, while lower than before, will climb from the current 4.5 percent to 5.625 percent next year.
"Basically, they were happy with me foreclosing, but it was more a pride thing for me. I took a debt and took responsibility for the mortgage and I don't think I could walk away from that. That's what I tried to let them know.''
Times researcher Carolyn Edds contributed to this report. Susan Taylor Martin can be contacted at firstname.lastname@example.org.
|Areas with most Home Affordable Modification Program activity|
|Metropolitan statistical area||Active trials||Permanent modifications||Total HAMP activity||% of all HAMP activity|
|New York-Northern New Jersey-Long Island, NY-NJ-PA||51,613||5,743||57,356||6.1%|
|Los Angeles-Long Beach-Santa Ana,CA||48,778||6,383||55,161||5.8%|
|Miami-Fort Lauderdale-PompanoBeach, FL||39,356||5,143||44,499||4.7%|
|Riverside-San Bernardino-Ontario, CA||38,040||6,139||44,179||4.7%|
|Atlanta-Sandy Springs-Marietta, GA||26,593||3,692||30,285||3.2%|
|Las Vegas-Paradise, NV||18,000||2,757||20,757||2.2%|
|Tampa-St. Petersburg-Clearwater, FL||12,752||1,943||14,695||1.6%|