In October 2008, JPMorgan Chase & Co. shaved 25% off Rick Mullen's mortgage payment by lowering his interest rate, helping him to stay in his Valencia home despite a downturn in his small business refurbishing large shipments of damaged shoes.
More than a year later, Mullen is grateful but frustrated, he says, because Chase has repeatedly lost his paperwork and never finalized what was supposed to be a three-month trial loan modification.
"I've talked to them at least 50 times, and it's always the same: . . . 'Oh, we're missing some documents, your modification is at risk,' " Mullen said. "How long are they going to keep me hanging?"
Loan-modification limbo is of high concern these days, not only to borrowers like Mullen but also to economists, consumer advocates and government officials pondering the fact that 1 in 7 U.S. mortgages is in foreclosure or past due.
Responding to an Obama administration initiative, lenders have temporarily restructured hundreds of thousands of mortgages, with hundreds of thousands more modified under the banks' own programs.
But achieving longer-term changes in the terms of mortgages has proved elusive, raising the prospect of a bigger wave of home repossessions that could cause a fresh decline in home prices only months after they appeared to hit bottom.
The Treasury Department announced in October that, after a slow start last spring, its Making Home Affordable loan-modification initiative had resulted in about 500,000 trial modifications. The department said the $75-billion centerpiece of its anti-foreclosure efforts was "on track" to meet its goal of offering at least five years of lower payments to as many as 4 million stressed-out borrowers.
But even after reporting this month that trial modifications had topped 650,000, the government still hasn't said how many of those loans have been permanently restructured. The Treasury Department says such numbers will be in next month's report on the program, which has been allocated $75 billion from the government's $700-billion Troubled Asset Relief Program bailout fund.
"You can't claim victory at 500,000 trial modifications and then have half of them drop out," said Paul Leonard, California director for the Center for Responsible Lending, a Durham, N.C.-based advocacy group.
