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BofA provides example of mortgage-modification foot-dragging

Banks have been slow to lower borrowers' interest rates or forgive a portion of the money owed. A Bank of America customer's two-year struggle is just one example.

May 07, 2012|David Lazarus
  • Miriam Ramirez with her employer, TV producer and director David J. Eagle. He gathered all the necessary documents and helped Ramirez fill out the application forms for a mortgage modification through Bank of America. Things went downhill from there.
Miriam Ramirez with her employer, TV producer and director David J. Eagle.… (Gary Friedman, Los Angeles…)

This is a story of persistence.

In the case of Miriam Ramirez, it's the story of trying to obtain a much-needed loan modification from Bank of America.

In BofA's case, it's the story of giving a mortgage customer the runaround for two years.

Loan modifications have been an increasingly nettlesome issue as millions of homeowners struggle to make mortgage payments during the economic slump. The Obama administration has called upon banks to be more diligent in assisting customers prior to foreclosing on properties.

But despite a $25-billion settlement last month over mortgage abuses, banks have dragged their feet on lowering people's interest rates or forgiving a portion of money owed.

"They're just plodding along," said Kathleen Day, a spokeswoman for the Center for Responsible Lending. "You could say things are a little better now, but they're not as good as they should be."

Ramirez, 40, owns a two-bedroom home not far from the USC campus. Her mortgage payments were running close to $2,300 a month, which was not an easy sum for her and her husband to come up with month after month.

Ramirez works as a housekeeper. Her husband's a truck driver. Some months, they had to forgo medical and dental treatments for themselves and their kids so they could keep paying their loan on time.

Despite the financial hardship, they never missed a payment.

In 2009, Ramirez's employer, TV producer and director David J. Eagle, read about the Making Home Affordable program, an initiative from the Obama administration aimed at lowering people's monthly mortgage costs. "It looked to me like Miriam could qualify," he told me.

Eagle gathered all the necessary documents and helped Ramirez fill out the application forms. Things went downhill from there.

"Bank of America put us through the ringer," Eagle recalled. "They kept misplacing documents and requiring us to submit the same materials. This went on for months and months."

Finally Ramirez was given a trial loan mod that lowered her monthly payments to about $1,500. Then, in May 2010, she received confirmation of a permanent modification that required a monthly payment of nearly $2,000 — not as affordable as $1,500, but better than the original $2,300.

Throughout this process, Ramirez continued making all her payments on time. She'd make them early, typically a week or two before they were due. And that's where the real problem began.

According to BofA's records, Ramirez made her May 2010 payment April 26. She submitted the $1,500 amount, as per her trial loan mod.

What happened next shows how easily a simple process can break down. BofA applied the check to Ramirez's loan balance but didn't acknowledge it as the first payment under the now-finalized loan modification.

Instead, it sent a notice to Ramirez a few weeks later saying she was late on her May payment.

I won't go into the gory details of Ramirez's and Eagle's subsequent correspondence with the bank. Suffice it to say that BofA simply couldn't get its story straight.

Sometimes it would say the snafu had been dealt with and all was well. Sometimes it would say that a payment was still lacking. Sometimes it blamed the situation on Ramirez. Sometimes it blamed it on Fannie Mae.

Eagle offered to pay the $500 difference between the $1,500 Ramirez had submitted and the $2,000 of the final loan mod. But BofA continued to insist that things were more complicated than that, and that Ramirez needed to pay the full $2,000 for May.

Eagle, acting on Ramirez's behalf, sought answers from various levels of BofA service reps, and got nowhere. He even wrote to the head of the bank, Brian Moynihan, seeking help in untangling the mess. Nothing worked.

So Eagle and Ramirez came knocking on my door.

"From an accounting perspective, this whole thing was handled correctly," a BofA spokeswoman, Jumana Bauwens, told me. "From a customer-service perspective, it could have been handled better."

The long and short of it: The Treasury Department requires that when a loan mod becomes finalized under the Making Home Affordable program, all mortgage payments must be made within the month that they're due.

Ramirez's early payment for May in April 2010 thus couldn't be counted as a regular payment. BofA, thinking Ramirez had simply handed over some extra cash, paid down her balance but left her May bill unpaid.

And for some reason that no one can explain, the bank was unable to pinpoint the problem or articulate it to Ramirez and Eagle. Instead, it merely kept insisting that the problem was Ramirez's.

"It's not the level of service we would like customers to have," Bauwens admitted. "For that, we apologize."

To make amends, she said BofA will go back and credit Ramirez's account with a full payment having been made as of May 2010 and all subsequent months.

Bauwens also said the bank will attempt to clean up Ramirez's credit record, which, not surprisingly, took a pounding throughout this entire mess.

Mistakes happen. But a responsible business doesn't let things slide for months and even years. It steps up and tries to solve the problem.

BofA didn't do that. And there's no telling how many other loan mods may be out there that have experienced similar misunderstandings and miscommunications.

Is it expensive to have actual human beings review case files? Yes. But this is how banks can avoid the "robo-signing" fiasco that ended up costing them billions in settlement dollars.

And for a bank like BofA, which reported $1.4 billion in profit last year, it probably wouldn't hurt to provide a little more of the human touch when it comes to dealing with customers.

I mean, two years of runaround? That's no way to run a financial institution.

David Lazarus' column runs Tuesdays and Fridays. He also can be seen daily on KTLA-TV Channel 5. Send your tips or feedback to david.lazarus@latimes.com.

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