Featuring Joseph Maggiore
Phoenix Business Journal, Jan 2011
Banks and mortgage lenders are shunning a $125 million foreclosure assistance program started by the state of Arizona in September.
Thus far, only one — National Bank of Arizona — has agreed to participate in a principal reduction program started by the Arizona Department of Housing.
Of the 1,055 Arizona homeowners who have applied, only one has qualified for help from the program. A National Bank borrower is slated to get $40,000 knocked off a distressed home loan. Executive Vice President Greg Wessel declined to give details about the borrower, but he said two or three more are up for approval.
The Housing Department started the Save My Home AZ program after receiving
$125 million from the Obama administration’s Hardest Hit Fund, which aims to help states with high foreclosure rates. Arizona has one of the highest foreclosure rates in the country, along with Nevada, California, Michigan and Florida. Half of the mortgages in Arizona are underwater, according to research and business services company CoreLogic.
The state program allows for borrowers facing foreclosure to receive up to $100,000 in principal reduction if their lenders agree to split that loan forgiveness with the state. To qualify, a borrower must be 60 days behind on the mortgage and be facing foreclosure.
ADH spokesman Shaun Rieve said Fannie Mae, Freddie Mac and major national banks are passing on the voluntary Arizona program.
“The program has been slow getting started due to significant resistance from lenders to consider any other foreclosure prevention programs beyond what they had to implement through (the U.S. Department of) Treasury’s HAMP program,” said Rieve, referring to the federal government’s Home Affordable Modification Program.
“When we provide examples of how our program can actually save them thousands of dollars, keep homeowners in their homes and stabilize neighborhoods, they answer that they just do not have the resources to implement another program,” he said.
RESISTANT BANKS
Bank of America, JPMorgan Chase & Co. and Wells Fargo — the three biggest banks in the Arizona market — are not part of the Save My Home AZ program.
Chase and Wells officials said they prefer forbearance programs and giving temporary help to unemployed borrowers rather than straight-up principal reductions. Chase participates in forbearance programs in Michigan and other states.
Both banks also are working with customers outside federal and state programs to help them avoid foreclosure.
Wells Fargo spokesman Tom Goyda said his bank has forgiven $3.7 billion in principal nationally since 2009, but also is focused on finding ways to help out-of-work borrowers. Both Goyda and Chase spokeswoman Mary Jane Rogers said their banks continue to talk to Arizona officials about the state program.
Freddie Mac spokesman Brad German said the underwriter is OK with forbearance, but still is considering the overall impact of principal reductions and forgiveness. Fannie Mae officials did not respond to requests for comment.
Bank of America spokesman Rick Simon said his institution also is talking to Arizona and other states about their HHF programs, but he said BofA prefers a national, across-the-board approach.
“While some states receiving funds are in the process of launching state-level programs with unique eligibility requirements and benefits, we continue to focus our collaborative efforts on implementing consistent programs nationally,” he said.
Simon said principal reductions and help for the unemployed are on the table as BofA looks at helping distressed borrowers.
Bank of America faces a consumer fraud lawsuit from Arizona and Nevada over its mortgage modification practices. Arizona Attorney General Tom Horne said earlier this month that suit was filed because BofA would not agree in writing to certain modification practices, including making sure homeowners weren’t being foreclosed on while they were working out modification terms. Chase and Wells signed off on those protocols, Horne said.
DECADE TO RECOVER
Wessel said National Bank prefers principal reductions to other antiforeclosure instruments, and that meshes with the state program. The state housing agency looks to turn around applications in 30 days, and his bank then takes 30 days to consider principal reductions under the state program. He said that approach gets to the heart of the problem, while others are less successful.
“We go straight to principal reductions. It fixes the borrower’s problem,” Wessel said. “We find the temporary solutions do not tend to work.”
Local real estate executives say other banks are very resistant to principal modifications, and that it could take a decade for the Phoenix housing market to bounce back.
“This crisis is not going to go away for 10 years,” said Dean Wegner, a mortgage banker with WJ Bradley Mortgage Capital Corp. in Scottsdale.
Wegner said he’s seeing very few principal reductions, even though that is probably the best way to help distressed borrowers and the overall market.
Joseph Maggiore, a Realtor with Realty Executives, agreed.
“Unfortunately, I only have clients that have had failed modification attempts and no real success stories,” Maggiore said.
Wegner said he’s still seeing distressed homeowners who try to work out modifications, but then get foreclosed on during the process.
“If you haven’t made a payment in three months, you can lose your house at any time,” he said.