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  • photo by Don Himsel

    David Pichadze lives in New Ipswich and is hoping to get his mortgage modified through his lenders.
  • photo by Don Himsel

    David Pichadze lives in New Ipswich and is hoping to get his mortgage modified through his lenders.
Friday, August 13, 2010

Local homeowners among those struggling to make home-loan aid program work

David Pichadze spent two years looking for the perfect home.

His search began just north of Boston along the outer belt of Interstate 495 and gradually moved north until he found it: a two-story, post-and-beam style on 14 wooded acres in New Ipswich.

Pichadze had been there only a year when the recession took hold. Enrollment declined at the ballet school in Newton, Mass., where he works as a music director. His side job teaching private piano lessons was pulling in fewer students and far less money.

“I tried to keep up with the changes to the best of my ability,” Pichadze said.

Pichadze, 47, is now part of the growing group of Americans trying – but failing – to stave off foreclosure through the federal Home Affordable Modification Program, or HAMP, created by the Obama administration under the Financial Stability Act of 2009.

HAMP was intended to help millions of Americans at risk of foreclosure refinance their homes or lower their monthly payments, but banks aren’t always cooperating. Homeowners are widely reporting lost paperwork, exorbitant wait times and flat-out refusals with little or no explanation. The program has also come under fire from consumer advocates and independent watchdogs.

Even the government official who heads the $75 billion program has gone public with his criticisms, claiming far fewer troubled homeowners than expected are receiving the help they need. Neil Barofsky, inspector general of the government’s Troubled Asset Relief Program, said late last month HAMP has not “put an appreciable dent in foreclosure filings.”

Pichadze, a native of the country of Georgia who moved to the United States 25 years ago to attend Berklee College of Music in Boston, said he has spent the last year and a half fighting for mortgage modification under the HAMP program, to no avail.

Lost paperwork

Pichadze has two mortgages because he opted for 100 percent financing: He owes Chase about $252,000 and Bank of America nearly $64,000. Unlike many homeowners facing foreclosure, Pichadze is not “underwater” because he owes less than the house is worth. Both mortgages are traditional, 30-year fixed rate loans.

Chase has been cooperative, Pichadze said. The bank forgave a couple mortgage payments a few months back to catch him up to date while the modification request is being processed, and the bank has said it is likely his application will be approved.

Bank of America, however, lost Pichadze’s paperwork several months into the process and asked him to resubmit the application, he said. Later, the bank dropped the case without telling Pichadze because he failed to submit up-to-date financial information each 60 days, he said.

“I didn’t know I had to,” he said.

Finally, Bank of America sent a letter June 21 denying Pichadze’s application. The letter did not contain a detailed explanation as to why, but warned that foreclosure proceedings would begin this month if he missed another payment. “We regret to inform you that there are no available options based on the financial information that was provided,” the letter said.

Pichadze said he is not asking the bank to make an exception for him. If he truly doesn’t qualify for the program, that’s fine; he just wants to know why. Pichadze meets all five of the U.S. government’s basic eligibility requirements, but that does not guarantee approval.

Bank of America spokeswoman Jumana Bauwens said the company will review Pichadze’s case and reach out to him. Typically, when a customer holds two mortgages and Bank of America’s loan is the smaller of the two, the bank waits to see if the larger loan modification is approved before taking action, she said.

Bauwens acknowledged that HAMP has not been without its problems.

“I have to tell you that there were some system issues with lost paperwork, but we’ve taken tremendous efforts to improve that,” she said.

The bank is far better equipped to process applications now than it was in early 2009, when Pichadze first applied and the whole industry was going through the “learning curve,” Bauwens said.

170,000 helped

Thus far, some 170,000 homeowners nationwide have received permanent mortgage modifications through HAMP. The U.S. government initially projected the program would help about 4 million homeowners, but TARP’s Barofsky has recently said the numbers will probably be half that or less.

It’s too early to tell what percentage of homeowners who receive modifications through the program will be able to keep up with the smaller payments. According to an Aug. 6 Reuters report, early numbers are tiny: Just 4,764 permanent modifications lasted nine months or more through the end of May.

In the first half of 2010, Bank of America alone made 72,000 permanent mortgage modifications through HAMP, more than any other mortgage servicer in the country, according to a recent statement from the bank. Another 88,000 homeowners received modifications outside of HAMP, it said. The bank did not provide information on how many customers applied.

New Hampshire housing experts say they have witnessed the frustration that homeowners are facing as they try to navigate the program.

“It’s real,” said Robert Tourigny, executive director of NeighborWorks Greater Manchester, a nonprofit affordable housing organization that offers foreclosure prevention counseling. “I think there’s a lot of frustration out there. People send in the documents; they don’t hear anything back.”

Initially, the banks faced a huge manpower problem, Tourigny said. Suddenly, they were in the business of re-underwriting mortgages, and they didn’t have the staff to handle it, he said.

Dean Christon, executive director of the New Hampshire Housing Finance Authority, said homeowners have found the process difficult and slow.

“Relatively few of the people that apply for it receive loan modifications that are particularly helpful to them,” he said. “I would argue that there is an increasing sense in the housing community that the program hasn’t been highly effective.”

There’s also some public misunderstanding about a bank’s obligation to the consumer, Christon said. Under the program, banks are supposed to do a “net present value analysis” to see if modifying a loan is a better deal for them in the long run than foreclosure, he said. If it’s not, they can still go ahead with the foreclosure.

“Not many people know that,” Christon said. “There was never really an expectation that lenders and servicers were going to make negative financial decisions to avoid foreclosure.”

Confusion

All of that is little comfort to homeowners like Michelle LaChance, of Nashua. She recently received approval from Wells Fargo for a HAMP reduction in monthly payments, but not before she sent letters of complaint to the governor, New Hampshire senators and the federal Office of the Comptroller of the Currency.

LaChance, a 51-year-old nurse, lost her job at Massachusetts General Hospital and took a position at St. Joseph Hospital in Nashua for about half the pay. She reports roadblocks with Wells Fargo that include lost paperwork and confusing or inconsistent instructions from various employees.

In the spring, LaChance was approved for a four-month trial modification while her permanent application was being processed, she said. Wells Fargo assured her that foreclosure proceedings would be postponed during that period, yet she received a letter July 10 saying she was in default and would face foreclosure proceedings if the bank did not receive a payment of $6,342.63 by early August, LaChance said.

Despite the reduced payment plan approved in late July, LaChance said she still worries that something will go wrong.

“I put the house on the market as a precautionary measure,” she said.

A Wells Fargo spokesperson could not immediately be reached for comment Thursday evening.

Pichadze, the New Ipswich resident, has also started sending letters of complaint to New Hampshire politicians. The offices of Sens. Judd Gregg and Jeanne Shaheen have both agreed to look into the case. Today, he is meeting with a housing counselor in Manchester to seek another opinion about whether he is eligible for HAMP.

“I’m busy following up on all this,” Pichadze said. “This is what I do. Write letters. Make phone calls. Follow up. I’m not employed during the summer months, but this feels like a full-time job.”

Ashley Smith can be reached at 594-6446 or asmith@nashuatelegraph.com. The Associated Press contributed to this article.