Pace of mortgage aid rising, but still slow

Since February, when President Barack Obama announced a lofty goal of limiting foreclosures by modifying up to 4 million loans over three years, the administration's program has been riddled with problems.

Banks couldn't hire and train employees fast enough to keep up with the crush of people who wanted to take advantage of the help.

Documents were lost. The government kept changing the rules.

For the industry, the transformation has been tremendous.

Before the housing crisis, mortgage servicing companies had collections departments that mainly tried to wring payments from tardy borrowers. Now the same departments, augmented with thousands of new employees, are engaged in the far more complex task of figuring out whether millions of borrowers qualify for help.

Bank of America, which collects payments on more loans than any other mortgage company, has lagged its competitors in the percentage of troubled borrowers it has signed up.

The steady rise in unemployment has made the problem even worse.

Bank of America gets about 100,000 calls a day from troubled homeowners, up from about 60,000 at the start of the year.

Government officials insist the program is on track. "We're reaching borrowers at a scale that has not been done by any other modification program," said Michael Barr, an assistant treasury secretary.

Indeed, there has been some progress lately. More people have been helped in recent months after the government started publishing a monthly report card detailing how many homeowners each bank had helped.

But experts still doubt the administration will come anywhere near its goals.

The program allows homeowners to have their mortgage interest rate reduced to as low as 2 percent for five years. After that, the rate can rise again, but the increases are capped at levels that were prevailing when the modification was made.

Qualifying is a challenge. For example, if you spend less than 31 percent of your pretax income on your mortgage, you're out. Second homes don't qualify. Neither do vacant homes.

As of last month, about 20 percent of eligible borrowers, or more than 650,000 people, had signed up. Most of those enrolled have been signed up on a preliminary basis for trials lasting up to five months.

To make the change permanent, they have to complete a pile of paperwork and show they can make payments on time. As of the start of September, 1,700 homeowners had completed the process. The government plans to publish an update in the coming weeks.

"We're just getting the early data in," Barr said. "But we can tell it's not good enough."

Bank of America's problem is huge. It is the nation's largest mortgage servicer, with about 14 million loans.

Nearly two-thirds of those come from the troubled portfolio of Countrywide Financial, which Bank of America bought last year.

The bank has spent millions of dollars to upgrade its computer systems, including fax servers that couldn't handle the deluge of documents. It has hired and trained about 3,500 workers who take calls, process loans and work on computer systems since the start of the year, raising the total to about 13,000. The bank has 11 domestic call centers and one in Costa Rica that handles Spanish-speaking callers.

Many hires have no mortgage industry experience.

Bank of America has signed up nearly 137,000 homeowners, early five times as many as in July, and the biggest raw number of any lender in the program.

But as a percentage of the bank's nearly 1 million eligible borrowers, it works out to 14 percent, far lower than Citigroup or JPMorgan Chase, which have signed up about 40 percent and 32 percent respectively.

Bank of America executives insist these numbers are misleading.

They point out that they have extended aid to more than 223,000 more borrowers this year, assistance that's not counted by the Treasury Department.

They note that about a third of its customers, whom the government deems eligible for help, don't qualify.

Frustrated homeowners, however, say that getting the bank to respond is a confusing, prolonged ordeal.

George Hicks, a retired and disabled veteran from Clovis, has been trying since spring to get help with his mortgage.

He owes nearly $340,000 on a Countrywide Financial option-adjustable rate mortgage,a loan that allowed borrowers to defer a portion of their interest payments and add them to the principal.

Hicks says he faxed documents several times and spoke with numerous Bank of America representatives but received conflicting responses. He was offered help after The Associated Press inquired about his case. The modification, if it is made final, will lower his monthly payment by about $100.

The process has been trying, he said, but "you kind of have to dance to their music."

Bank of America say the publicity around the program has created a belief that a lender is obligated to help.

"It's not an entitlement," said Jerry Durham, Bank of America's Texas-based vice president of homeownership preservation. "It's something that we use as a tool to help keep them in the home when they're facing hardship."