Tuesday, September 14, 2010

Mortgage modification makers get poor grades

Mortgage servicers get sloppier during the loan modification process than they do during the loan origination process, according to the recently released J.D. Power and Associates study.

by Broderick Perkins
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Deadline Newsroom - If you thought it was tough getting up to snuff on the mortgage application process, wait until you get a load of the mortgage modification mine field.

Mortgage servicers get sloppier during the loan modification process than they do during the loan origination process, according to the recently released J.D. Power and Associates' "2010 U.S. Primary Mortgage Servicer Satisfaction Study".

That means you'll need to take the initiative and learn the ins and outs of the mortgage modification process before diving in.

"This will not come as a great surprise to many homeowners who have had to endure the tribulations of loan modification," said Bruce Hahn, president of the American Homeowners Foundation.

A mortgage modification occurs when the lender reworks the terms of an existing home loan, typically to lower payments and make the home more affordable, according to a helpful and inexpensive resource, Silver Spring, MD-based mortgage expert Peter Miller's "The Quick & Dirty Guide To Successful Mortgage Modifications" (Silver Spring Press, $2.99).

To get the payment down, mortgage modification lenders lower the interest rate, extend the loan term, reduce the principal or use any combination of those approaches. Modification are often use as an alternative to foreclosure.

"With more than a million borrowers signed up for mortgage modification programs the overall result is that most are wildly unhappy with their loan servicers," says Miller, whose publication uses an easy-to-understand linear approach that takes the mystery out of the mortgage modification process, a process which apparently stymies even lenders.

According to J.D. Power, compared with the loan origination process, mortgage servicers do worse in mortgage modifications in a host of areas.

• In terms of providing and meeting a time frame for approval.

• In terms of asking for information more than once (in order to be sure to obtain information crucial to the modification).

• When explaining the entire process during application.

• In terms of providing proactive status updates during the process.

The study measured customer satisfaction with five areas of the mortgage servicing experience: fees; the billing and payment process; escrow account administration; website; and phone contact. The study is based on responses from 4,516 homeowners queried May through June 2010.

"While the loan origination process is already a milestone event for most homeowners, the stakes are even higher for those going through the modification process," said David Lo, director of financial services at J.D. Power.

J. D. Power says there are several key service practices that can have a particularly strong positive impact on customer satisfaction:

• Fee transparency. Communicating all fees in a concise way to ensure complete understanding and no surprises.

• Informative account statements. Providing account statements to ensure that the most important information customers need is easily found.

• Billing and payment by preferred method. Ensuring that customers are able to receive account statements and make payments through their preferred method.

• Problem resolution. Ensuring that once a problem is identified, it is resolved quickly and efficiently.

Says Miller, "You can easily understand that clarity is required with the first three items, it’s the fourth which is a problem. "Resolution" may not possible and in cases where a borrower has lost a job there’s nothing the servicer can do to help the homeowner short of offering them employment."

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Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group, including DeadlineNews.Com, a real estate news and consulting service and Web site, and the Deadline Newsroom, DeadlineNews.Com's news back shop.

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Perkins is managing editor of HomeAway.com's Gulf Coast Response Center.

Perkins was the first Examiner to cover three beats for the Examiner.com news service:
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