Giant bank, giant struggle: Foreclosure-assistance pipeline clogged for Bank of America

NEW YORK – March 5, 2010 – Two years after swallowing the troubled mortgage giant Countrywide Financial, Bank of America trails other major U.S. lenders in resolving troubled home loans through short sales or modified loan terms.

The lender, one of the nation’s biggest banks, holds more than a million mortgages that are months behind on their payments – twice as many defaulting home loans as any other lender in the country. But it has given permanent mortgage modifications to only about 1 percent of those borrowers – one of the lowest rates among lenders nationally, according to a report released last month on the federal government’s Home Affordable Modification Program.

The issue is key in Metropolitan Orlando, which has the nation’s 11th-highest rate of mortgage modifications, with 18,000 homeowners in trial modifications and 2,468 in permanent ones, the report stated.

Loan modifications aren’t the only way of out a foreclosure. In January, about a quarter of all Orlando-area home closings were short sales, which occur when the lender allows a homeowner to sell the property for less than what’s owed on the mortgage.

But when it comes to short sales, Bank of America also lags other lenders, real-estate agents say, by taking too long to respond to offers.

“Realtors that I work with, if they hear Bank of America, they won’t even show the property,” said David Pruett, a broker for D.A. Pruett Properties.

The chairman of the Orlando Regional Realtor Association, Kathleen Gallagher McIver, said recently that Bank of America has the worst record for expediting short sales, “and there’s not anyone out there who will tell you otherwise.”

Bank of America acknowledges it needs help with its short sales.

“We clearly recognize the need to improve the short-sale process for both our customers and the real-estate professionals who are critical to a successful transaction,” said Jumana Bauwen, a bank spokeswoman.

The company said it has updated its training, enhanced its technology and established a short-sale team to help customers and real-estate agents navigate the process. It is piloting a short-sale program for owners who don’t qualify for new mortgage terms. And it has established a 24-hour phone line so agents, buyers and sellers can track the status of their short sales.

Bank of America is not alone in its struggles to deal with the avalanche of defaulting home mortgages, according to the February modification report by the U.S. Treasury Department and the U.S. Department of Housing and Urban Development.

Wachovia Corp., now owned by Wells Fargo & Co., has approved permanently modified terms for fewer than 1 percent of its 86,461 defaulting mortgage customers. American Home Mortgage Servicing Inc. has a similar track record with the 127,521 mortgages headed toward foreclosure that it holds. Among the nation’s largest lenders, GMAC Mortgage Inc. had the best rate: 17 percent of its 65,751 defaulting home loans have been permanently modified.

Bank of America, which inherited much of its mortgage portfolio from Countrywide, says part of the problem is that many homeowners have not been diligent about submitting the documents needed to convert a trial mortgage modification into a permanent one.

Clermont resident George Simmons said he is now totally frustrated, having tried for more than a year to get Bank of America to convert a series of trial modifications into something permanent.

“Let’s see, the last correspondence I had from them said they didn’t have my income-tax return and my Social Security records,” Simmons said. “I sent it to them so many times. I’ve got my fax receipts and my certified postal receipts. They just keep asking for the same paperwork over and over and over again.”

Overall, about a fifth of Bank of America’s defaulting-mortgage customers have received temporary, three-month trial modifications. To address the huge volume of troubled loans needing permanent solutions, the company has hired about 15,000 staffers. Workers knock on doors and call homeowners with trial modifications at least 10 times before the temporary terms expire in three months.

At one point, Bauwen said, Bank of America was behind in getting homeowners into trial loan modifications. But it has ramped up those efforts, she said, and many of those trials will be converted into permanent modifications.

More importantly, Bauwen added, the company is not ramping up its foreclosure efforts unnecessarily.

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