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NYT Norris: "Banks Losing Paperwork? What Am I Missing?"

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After reading Chief Financial Correspondent Floyd Norris' blog entry in The New York Times last week it's easy to assume that he's suffering from some journalistic version of Stockholm Syndrome, showing loyalty to the banks that have taken our economy hostage.

In his post, "Are Banks Losing Lots of Documents?" he responds to e-mails he received in response to his column from the same day titled, "Why Many Home Loan Modifications Fail." He speculates, with the helpful guidance of J.P. Morgan Chase employees, that mortgage defaults and the dearth of modifications may be the fault of homeowners who have failed on a large scale to submit the necessary paperwork.

In his article, Norris describes "frustrated Chase employee[s]" who he observed struggling with homeowners to get them to cooperate in the loan modification process.

Having spent a day at a Chase call center in Jacksonville, Fla., Norris tells of one employee, Dominique Perez, who was running around trying to "round up" paperwork from homeowners who simply were not responding to her pleas. In many cases, Norris reports, people are not submitting the proper paperwork or simply not making the payments once Chase modifies the loan. Norris goes on to say, "the Chase representatives appeared eager to approve modifications, and were prepared to believe anything people said about their income."

One e-mail, he writes, accuses him of asking foxes to tell him about chickens. "Between regular assertions that they 'lost the copies' and outright, documented LIES that I did not call or fax, I am still struggling with them in DECEMBER," the e-mail reads. "I can assure you that I have complied promptly and completely with their every request -- and I am certain I am not a limited statistic -- as your column strongly implies."

In another e-mail, University of Arizona law professor Jean Braucher, who wrote a paper on the crisis says, "I think the major reason we are seeing so few permanent modifications may turn out to be that many servicers are losing documents or perhaps refusing to admit that they have documents. There have been many accounts of borrowers getting the runaround at the stage of trying to get a trial modification, and now I believe there is reason to suspect that pattern may be continuing at the stage of conversion from trial to permanent modification."

In this report released by the NCLC, Diane Thompson illustrates in great detail why banks would resist or even avoid modifying mortgages.

Norris responds to the e-mails on the blog saying, "I see no reason for the banks to purposefully lose the papers. What am I missing?"

His response wasn't much different when he appeared on NPR's On Point, recounting the same story. When host Tom Ashbrook skeptically asked if he'd gone to the bank as a result of being invited, Norris didn't respond. Other guests of the show, Elizabeth Warren included, were equally skeptical.

I've received several e-mails from homeowners as well. Marie, whose loan was once with WAMU and is now with Chase, writes:

We also know that our loan was in the portfolio of loans CHASE acquired for about three cents on the dollar when they bought WaMu on September 26, 2008. They paid $1.9 billion for $310 billion of assets. Even if $31 billion of the home loans fail as has been projected, CHASE is far ahead here. Why would anyone look at CHASE as being a white knight here? I would have bought my home back then from WaMu for three cents on the dollar, why did the feds broker this deal to CHASE?

Chase received $25 billion from the bailout, has an additional $3.4 billion committed for HAMP, and has modified approximately 4,000 of its 448,000 potentially eligible mortgages.

Marie goes on to write:

... after submitting paperwork repeatedly, we were denied a modification due to "insufficient income". We were told to resubmit for modification, so we submitted a second time. CHASE then offered a trial plan and increased what was already an unaffordable payment by $700/month. CHASE told us since we do not have a FreddieMac or FannieMae backed loan, they could use whatever percentage of income they wanted on an in-house mod, they did not have to stick to the 31%.

Norris also brings up the 31 percent in his article, saying "The arithmetic of "Obama mods," as some call them, is laid out by the government. The 31 percent number is fixed in stone, which provides some simplicity but also can be arbitrary."

But according to the Frequently Asked Questions Home Affordable Modification Program that's not quite true. The FAQ, available on the Home Affordable Modification Program (HAMP) web site, is pretty clear, "A servicer may modify below 31 percent, subject to applicable contractual agreements, but incentive payments will be made based only on modification terms that reflect a 31 percent monthly mortgage payment ratio."

So while the percentage is by no means cast in stone as Norris was told, the banks receive no taxpayer incentives for going below the 31 percent.

In another e-mail from a homeowner, Teresa says:

I wrote to CHASE/WAMU with evidence of hardship and all paperwork faxed on time. They put me on 5 trial payments under HAMP because my house was worth less than what I owed and could not refinance at a lower interest rate. Last week, I got news I did received a modification with a reduction of 0.5% interest rate only. AND making my payments higher because my balance increased as they included late payments and interest. They used my trial payments to pay late fees instead of applying them to my balance. They overvalued my house from 200k to 400k this time. They accused me of paying off credit cards and other debtors instead of paying them and refused to help me. They are foreclosing my home after months of false hopes by next month.

And this homeowner, named Ben, pretty much says it all:

May 16th 2009 I receive my HAMP Trial Period Plan. I returned all requested documentation along with my first trial period payment in the amount of $2,203.50 by the June 15th due date. I made all three required payments and called in August to see bout my permanent modification. They stated they are behind and they were missing documentation.


So August 21st 2009, I resent via UPS all documentation and application again. I then called to confirm receipt and customer service verified all information had been received. Then I call again at the end of September and they still need more stuff, I resent everything October 1st. Again called to confirm that they had received everything. I continue to make my "Trial" payments now we are in December and payment number 7 is due. I call the executive offices at Chase 866-605-9253 to check on my permanent modification 12/9/2009 and was informed by Bridgette at ext 3302 and she notifies me as of November 19th I was declined, that my debt ratio is too high. I am declined for the same program you pre approved me for? After you had all my income documentation you put me in HAMP and then get 6 payments from me and decline me? It's infuriating.


Bridgette offers a 3 way phone conversation with the negotiators manager, Andre at 818-775-6637, at which point he begins to tell me that it just doesn't make financial sense for Chase to do the modification. Chase would rather foreclose on the property then let me stay in it and pay the mod payment as taking the loss write off for Chase is a greater profit margin then the return of the modified loan over 30 years. So it wasn't my debt ratio after all. He also tells me the Trial Plan was actually not a pre-approval, it was just a waiting period for Chase to get to my loan to be reviewed for a modification. Seriously? That's not what I was told and not what the documents state. I feel like I have been deceived and feel that Chase used the Trial payment to get as much as they can out of me.


There are thousands of homeowners in my same situation. I just want to stay in my house and pay a payment that is 31% of my income. I have a monthly adjustable, negative amortization loan that I would like to be fixed over 30 years. After going through a short financial crisis, I have shown the ability to pay, willingness to pay and the desire to stay in my home. Isn't that for whom the Obama HAMP Program was designed?

From the e-mail I've received about Chase, Bank of America, Ocwen, Citigroup, et al, it's hard to believe that millions of people are having difficulties with paperwork that consists of a letter of hardship, a tax form, and a pay stub. It's also hard to believe that if payments are lowered by any reasonable amount people aren't making the payments as Norris reports.

Maybe Norris would have been better served spending half his day at Chase with Dominique and the other half with some of these people -- actual Chase customers.

Reporters, journalists, and correspondents ideally report all sides of a story. It's a responsibility that has been ignored of late. When a reporter panders to the industry they are covering they do a disservice to the public that turns to them for the truth.

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