A government program to temporarily lower mortgage payments for millions of struggling homeowners can be a bureaucratic nightmare that has left some homeowners saying it’s done them more harm than good.
April and Scott McMeekin are one family who thought they found the perfect solution to stay in their home after Scott’s hours were cut and April was temporarily unemployed.
“We called our mortgage company and talked to them and they actually told us about the modification and said it would be perfect for you. It will work for you guys great,” April told FOX Undercover’s Mike Beaudet.
It sounded perfect. The US government program encourages mortgage companies to temporarily lower monthly mortgage payments by on average $500. It's supposed to help as many as five million Americans stave off foreclosure.
The McMeekins saw it as a chance to hang on to their home until times got better. So they applied. The problems began soon after.
“I’ve sent my package in four times. I've spoken to about 190 different people. Everybody gives different answers. It's in review, we need further information, we need current this current that,” April said.
Their application turned into a bureaucratic nightmare of lost paperwork and worse. As the months dragged on, they fell deeper into debt. By last march, eight months after they applied, their lender said they were in default and they owed $11,059.17 – a figure the McMeekins said they didn’t know about.
By May, their application was rejected, partly because the lender said they were not living in the home. They had, in fact, never left.
To the McMeekins, it was just one more mistake that left them headed to foreclosure.
“Now they're coming back saying we owe so much money there is no way I can pay that,” she said.
The McMeekins aren't the only ones frustrated. Experts say there are perhaps thousands of stories like theirs. Families who should qualify for government mortgage relief instead can't get through their lenders’ red tape. They fall further behind, and possibly lose their home to foreclosure. Out of 1.3 million borrowers who have started a mortgage modification, less than a third -- 389,198 -- have finished the process.
“I think this is a huge problem,” said Kathleen Engel, a professor at Suffolk University Law School and an expert on mortgages.
She says the industry has been overwhelmed by the demand for modified mortgages.
“The image I have… is of a room full of fax machines with the paper all flying up in the air, getting mixed up because they're getting tens of thousands of faxes every day,” she said.
Engel says some foreclosures are being prevented, but bureaucratic ineptness is blocking qualified people from getting help.
“If the measure of success is, have we stopped this problem, or brought it to an acceptable level, the answer to that is no,” Engel said. “We still have huge numbers of people who are heading into foreclosure.
Kevin Cuff, executive director of the Massachusetts Mortgage Bankers Association, said the lenders are getting better “every day” at handling mortgage modifications.
Cuff says it's inevitable that some people will lose their homes to foreclosure, regardless of whether their monthly payment is lowered or not. Still, cuff says mortgage lenders really do want to help.
“Lender understands what they're going through and they understand the processes to try and help them, and if they can I am certain they will do everything that is in their interest to do,” he said.
But April McMeekin is not so optimistic.
“They're supposed to be helping. It's not helping, it's just pushing you further and further in debt, and you can't come out of it. I would suggest nobody ever do these modifications. Ever,” she said.
The McMeekin's lender wouldn't discuss the family's complaints with us, but soon after we called the company reversed itself and the family's application for a mortgage modification. With a lower interest rate, the McMeekins are saving three hundred dollars a month.
Their lender, PHH Mortgage, did tell FOX Undercover that they have tripled the number of employees helping struggling borrowers.