The changes will no doubt cost the banks a considerable amount of money to implement. Since the foreclosure mess erupted last year, JP Morgan Chase has already spent $1.1 billion to create and apply the changes and Citigroup predicts the changes will boost expenses by as much as $35 million a year.
On Thursday, Fannie Mae and Freddie Mac rolled out new protocol designed to increase the number of successful modifications. The guideline will require servicers to reach borrowers as soon as the first missed payment occurs and will continue to with the intention of modifying the loan. They'll also pay more to the servicers that meet certain benchmarks and establish timelines for banks to modify loans or process foreclosures.
The Regulators have asked the banks to create programs that establish a single point of contact, have deadlines that are "appropriate", and hire more people to facilitate the programs and assist it's borrowers. These are the minimum requirements and some have already made the necessary changes.
Last June, Wells Fargo began assigning two employees to each borrower seeking a loan modification. They found that the program "significantly improved customer communication and the modification process," said spokeswoman. Wells Fargo also plans to expand the same effort to foreclosures and short sales.
Ally Financial has assigned borrowers a team of employees to help them gather documents, execute a final loan modification or advises on other foreclosure alternatives.
J.P. Morgan is working on a software program to make it easier for employees and borrowers to track loan-modification requests. Last year, it started providing some borrowers with a "relationship manager" to advise on the process. No word yet on when the software will be available.
Citigroup now provides borrowers with a single point of contact for gathering documents and handling short sales. In the next months, it will roll out a "concierge" system that will assign a small team of employees to help delinquent borrowers and homeowners at risk of default navigate the system.
Bank of America has begun its version of a single point of contact but declined to provide details. For the past year or so they have used the Equator system that enables better communication and facilitation of short sales between real estate agents and the negotiator. Currently the time frame of the short sale, with the use of this system, is about 5-16 weeks. Bank of America is continues to make changes to their practices in order to reduce this time frame further.
As far as "appropriate" deadlines, the Los Angeles Neighborhood Housing Services says it takes an average of 141 days for borrowers it works with to get an answer after completing an initial loan-modification request. The nonprofit group says Wells Fargo has the fastest turnaround with initial reviews averaging 79 days. A Wells Fargo spokeswoman said 60% of borrowers receive a decision five days after the company receives a complete package, up from 45% a year ago.
Ally Financial said it responds to the average borrower within seven to 10 days of receiving a complete financial package.
At Citigroup, the goal is to give borrowers a final answer about a permanent modification within 22 days of their final trial payment. "On average, we do that," said Sanjiv Das, chief executive of the CitiMortgage unit.
When it comes to staffing, J.P. Morgan said it will add as many as 3,000 new home-lending jobs, BofA said it hired roughly 3,000 people in the first quarter to work on troubled mortgages and Citigroup said it will expand its loan-modification unit by 500 employees. Wells Fargo doesn't expect to increase staffing because according to their reports the number of borrowers behind on loan payments is declining.
As far as how these programs will affect the number of short sales or foreclosures we will have to just wait and see.
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