Details often hinder help on mortgages

PHILADELPHIA -- It all comes down to details: The success of the federal government's attempts to keep homeowners from defaulting on their mortgages appears to hinge on small things such as a servicer not losing a customer's documentation.

That's the message that community groups gave yesterday to three members of the oversight panel for the Troubled Asset Relief Program. At a hearing in Philadelphia, the panel looked at whether the Obama administration's plan to attack the mortgage crisis has led to more affordable mortgages for struggling homeowners.

The Obama administration has set aside $50 billion from the financial industry bailout to prod lenders to modify more loans, but little money has been spent so far, since lenders have to complete three-month trials to get paid.

The community groups said disparate banking practices and inefficiencies have led to delays in approvals, clogged the pipeline, and curtailed the success of loan modification programs.

Eileen Fitzgerald, chief operating officer of NeighborWorks America, said it can take as long as two hours to reach a mortgage servicer. Some homeowners send in documentation but are asked to do so again. At times, mortgage servicers appeared cagey about disclosing the full terms of the new loan.

"There's a huge process problem here," Fitzgerald said. "If you ask, how could you design a more dysfunctional system? You can't."

Lenders acknowledged that they've had trouble handling the deluge of loans initially, but service has improved.

"It's not easy, but it's something we've gotten better at each month," said Allen Jones, an executive at Bank of America Corp.

But the lenders' view of their performance differed from those of the community groups. Asked to give themselves a grade, Bank of America and Wells Fargo & Co. rated themselves a "B" while two groups gave the mortgage industry a "D."

"Some of the larger banks may have been overly generous," said Richard Neiman, superintendent of banks for New York and a member of the oversight panel.