Pace of mortgage help rising but still slow

updated 12:17 p.m. ET Nov. 15, 2009

PLANO, Texas - Shontaye Edwards spends her day in a gray cubicle at a Bank of America call center in this Dallas suburb. On the other end of the phone line are homeowners — tense, exasperated and looking for help.

They often call with questions about the Obama administration's plan to help borrowers modify their mortgages, but many simply don't qualify. They make too much money, or too little. They have too much debt. They don't actually live in the home.

"I do get attached at times," Edwards says during a momentary break in the office where she and about 350 colleagues sit under flat-screen displays showing how long callers have been kept on hold. "But at the same time ... we have to go by the procedures."

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 is now getting 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.

It’s a challenge to qualify
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 already 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. However, most of those enrolled so far have been signed up only 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, only 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."

Call center uses ‘soft skills’
At the Bank of America call center in Texas, workers in the bank's "Home Retention" division get as many as 15 calls an hour. They're from people being laid off, getting divorced, dealing with a pileup of medical bills or trying to get out of a risky loan made during the housing boom.

On the other line are workers like Edwards, 23, who is also finishing her bachelor's degree at night. They make $28,000 to $35,000 per year, plus overtime and bonuses. They get four weeks of classroom training, starting with mortgage industry basics.

The training includes detailed scripts for how to respond to specific situations, such as when a borrower can't qualify because his income has been cut dramatically, and "soft skills," such as how to express empathy.

Edwards is polite and professional, even when emotions run high. "I have family that ... are in the process of losing their home and needing assistance," she says. "So I definitely understand."

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