Study: Race plays role in mortgage modifications
In California, homeowners of color have a harder time getting a home loan modification than their white counterparts, according to a report from the California Reinvestment Coalition.
The report drew its conclusions after combining data from the Treasury Department’s Home Affordable Modification Program and a survey of nonprofit housing counselors.
The take-home message from the study is this: If you want to get a loan modification, take the paperwork seriously and get professional help.
Gather every bit of paperwork the bank has asked for and take it to a nonprofit housing counselor.
If you’re missing even one thing the bank has asked you for, you could lose your home.
Take your paperwork to a nonprofit housing counselor who uses a software system called LoanPort, which scans your documents and loads them directly into the mortgage lenders’ system, so they can’t get lost.
Being really diligent about following up is important because the odds of getting a loan workout aren’t in your favor no matter who you are, but especially if you’re a person of color.
The study found:
- Of 568,630 borrowers requesting loan modifications in California, 46% were immediately told no and 23% were told yes. The other third of the applicants are doing trial modifications where the bank agrees to temporarily accept lower payments, or they had their temporary modifications canceled.
- Principal reductions are nearly impossible to receive. In Los Angeles and Fresno, for example, only 5% of loan modifications included some degree of principal forgiveness.
- A lender talking to you about a modification will continue to try to foreclose -- 94% of housing counselors reported that homeowners are losing their homes while negotiating for a loan modification with their servicer.
- Much of the data released from Treasury was incomplete or inadequate for true transparency.
Differences in the way borrowers were treated also showed up in the data:
- "Incomplete modification requests" was the most frequent reason for trial modification cancellation, but borrowers of color had the highest share of cancellations for this reason. In Fresno, Latinos and African Americans had trials canceled for this reason 47% and 44% of the time, compared to 37% of white borrowers.
- The issue of servicers losing documents several times persists. One housing counselor reported that a loan servicer rejected a modification application because it was in Spanish.
- In Los Angeles and Sacramento, African Americans disproportionately had their trial modifications canceled for the reason "not accepted by borrower." CRC worries that this means servicers are steering applicants to less favorable non-HAMP modifications.
Follow Interest.com on Twitter.