Banks Block State’s Attempts to Help Homeowners

Here’s a shocker.  Arizona has been given millions from the federal government to help distressed homeowners.  Guess who won’t play ball?  Hint: it’s not the homeowner.

Arizona Republic, Arizona Trying New Ways to Assist Homeowners by Catherine Reagor, full article here:

Officials and housing advocates say mortgage lenders are the reason for the  breakdown: Much of the aid was intended to be used to pay off a portion of what  a struggling homeowner owed, as long at their lenders agreed to forgive an equal  amount.

But large banks and the federal mortgage agencies that back many loans have  been slow to respond or have not agreed to loan modifications, despite the  federal backing for the program, officials say. Though dozens of applicants  qualified for that form of aid, only three had their banks agree to the loan  modifications.

“We have done and are doing everything we can to spend this money on  homeowners who desperately need it,” said Michael Trailor, director of the  Arizona Department of Housing. “Lenders are making promises and commitments they  aren’t keeping.”

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Loan modifications

In March, Bank of America committed to working with Arizona’s housing agency  to finalize thousands of loan modifications, reducing what borrowers owed in  exchange for a partial payoff.

The program can reduce a homeowner’s principal by as much as $100,000 if the  bank agrees to forgive half. That can translate into a monthly payment reduced  by more than $1,000.

The state agency estimates at least 30,000 BofA borrowers in Arizona could be  eligible for the aid.

But the lender has yet to complete one of the program’s loan modifications,  housing officials said. The bank didn’t return calls to comment. Similar  problems have stalled efforts to help borrowers with other banks or with  federally backed mortgages.

So far, the program has completed three loan modifications and spent  $63,000.

“It’s been more than disappointing working with the major lenders, but we  aren’t giving up,” said Reginald Givens, foreclosure assistance administrator  for the state agency.

The first loan modification under the state program was done in January with  National Bank of Arizona. Kim Hensley, a counselor with Genesis Housing  Services, a non-profit housing counseling service, worked with a Phoenix  homeowner to obtain an $80,000 principal reduction.

“The Housing Department has worked to create some really good programs, and  they are really trying to help people,” she said.

She noted that so far, counselors have found success reducing principal only  on loans made by small banks. “I have found to do one of these loan mods, you  have to stay away from the big lenders,” she said. “They aren’t interested and  are just wasting everyone’s time.”

She has also been able to help homeowners with some of the Housing  Department’s other programs funded by the federal money, including assistance in  paying off a second mortgage. About $42,000 of the state’s federal money has  been spent on second-mortgage assistance.

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