Florida Attorney General Bill McCollum says some of the country’s largest banks are not doing enough to keep families in their homes.

McCollum’s office has been receiving a wave of complaints from homeowners who are trying to modify their loans only to find a trail of paperwork, unanswered  questions and unreturned phone calls.

AG Bill McCollum

During the event, the Attorney General called on the banks to do the right thing by their clients and make customer service a priority, and report to the state on any new measures they implement.

According to RealtyTrac.com, Florida has the third highest foreclosure rate in the nation with one out of every 168 housing units receiving a foreclosure filing.

“Big banks were a large part of the problem and now it seems to be that they are unwilling to be a part of the solution. We need to have the banks step up to the problem,’ says McCollum.

According to McCollum, it was largely the irresponsible conduct of lenders that contributed to the current financial mess.

BoA leads the pack

“Bank of America has the largest number of complaints we receive about the services they render,” says McCollum.
This year the Office has logged 452 complaints regarding Bank of America’s (BoA) loan modification and mortgage services.

According to National Mortgage News, after purchasing Countrywide Financial last year, Bank of America (Florida’s largest lender) had nearly 82,000 mortgages originating in the state, worth approximately $15.3 billion.

JP Morgan Chase is next in line in number of complaints with 69 on file with 69,000 mortgage loans.

Wells Fargo which acquired Wachovia rounds out the top three with 51 complaints and almost 57,000 home loans originating in the Sunshine State.

A year ago, McCollum, reached a settlement with Bank of America that was supposed to provide $150 million in foreclosure relief nationwide for its borrowers. According to the terms of the settlement, Bank of America was to launch a loan modification program that would help 52,000 Florida homeowners get new mortgage loans.

Bank of America reported in December that it has provided loan modifications for more than 600,000 homeowners since January 2008.

Most of the renegotiated loans were handled through the government’s Home Affordable Modification Program and the bank’s own policies, the bank said. According to the bank, it had provided $215 billion to refinance existing mortgages.

“Fair and efficient process”

Attorney General McCollum sent a letter last month to the Florida executives of Bank of America, JP Morgan Chase, Wells Fargo and Wachovia, calling upon the bank executives to provide homeowners with a fair and efficient loan modification process. McCollum also requested the executives meet with him to discuss the banks’ responsibility to help solve the housing crisis.

“These banks should take a page from companies known for their customer service and treat their customers’ right,” McCollum said.

The Attorney General’s office is currently responding individually to all homeowners who file complaints and providing homeowners with information on mortgage fraud.

No incentives

Why have government programs failed to slow down the foreclosure meltdown?

According to a new report from the National Consumer Law Center (NCLC), mortgage servicers, including many large banks, have found it cheaper to foreclose on a home rather than to offer loan modifications that would benefit homeowners and investors.

The NCLC report, “Why Servicers Foreclose, When They Should Modify, and Other Puzzles of Servicer Behavior,” reveals that servicers, unlike investors or homeowners, generally don’t risk losing money on foreclosures.

In fact, servicers are more likely to try and offer homeowners repayment plans or forbearance rather than home modification. The reason is that modification means a certain loss for the servicer, while alternatives offer the potential for profit.

“Foreclosures are a costly ordeal for the homeowner, the lender, and the community,” says Diane E. Thompson, an attorney with the NCLC who authored the report.

Thompson said that the organizations that could help the situation, such as the federal government have not succeeded in providing servicers with incentives for offering loan modification.

The NCLC report recommended a number of steps to help stop the foreclosure crisis.

The organization suggests including further regulation of loan originations, mandating loan modifications before foreclosures, and offering principal reduction through the government’s Home Affordable Modification Program (HAMP).

Mónica Rosas. Miami