Frantic hiring of mortgage negotiators has helped U.S. lenders sidestep a wave of home foreclosures, but drawing up new loan agreements takes more hustle than ever. Banks are now setting up mortgage triage units across the country and some are even meeting borrowers near their homes.
The push to rewrite home loans began in earnest early last year, as traditional banks scrambled to avoid becoming de facto real estate holding companies. Spurred by the Treasury Department's $75 billion foreclosure prevention program, Bank of America, Citigroup, JPMorgan and Wells Fargo collectively added about 29,000 workers to units renegotiating home loans.
Those four companies comprise roughly two-thirds of the U.S. mortgage market and their efforts are already bearing fruit.
Of the 52 million U.S. households with mortgages, about 8.6% are more than 30 days late on payments, that's down from 12.4% in October, according to LPS Applied Analytics, a research firm in Denver. In March, the number of mortgages that were more than 90 days overdue fell for the first time in three years, according to Fannie Mae.
"Certainly, the implementation of the program has been slower to come out of the gate than we would have liked," said Phyllis Caldwell, head of the Treasury Department's home preservation office. "But we're making good progress on something that was a startup, something done at a time of crisis and something that has been done on a scale that none of us has seen in our lifetimes."
And while the country's biggest lenders have slowed or stopped their mortgage-related hiring, they don't expect to shrink their loan-negotiating departments anytime soon.
"We're not viewing this as a temporary situation," said Michael DeVito, head of default operations at Wells Fargo. "Our staffing constraints are a function of how many customers need help, not a function of a timeline. If that means that circumstances require us to grow again, we'll grow again."
By the end of April, new agreements had been offered on slightly less than half of the 3.3 million mortgages that qualified for the federal "Help for America's Homeowners Program" (HAMP). The initiative will expire at the end of 2012.
The average homeowner that has reached new terms on a mortgage under HAMP is paying roughly one-third less than under the terms of their old loan. All of the participants were granted lower interest rates, and about half of them won an extended payment period and 29% had some of their principal forgiven.
Still, banks have struggled to communicate with customers and draw up terms that stick. Almost a quarter of all loan modification trials under HAMP have failed, according to Treasury Department figures released May 17. And the success rates vary widely, depending on the fiscal health of borrowers and how quickly banks got to work on trial modifications. Bank of America has seen only one in 10 loan modifications fall through, while some 42% of Citi borrowers that signed new agreements failed to make good on the new terms.
Making Progress
Caldwell at the Treasury Department said that the entire industry underestimated the difficulty of working out new mortgage terms with homeowners. She also noted that it took some time for banks to prioritize borrowers, not just shareholders.
"Servicers really had to shift their business model from one of collecting checks and foreclosing when they couldn't collect checks to something that looks much more like loan origination," she explained.
Wells Fargo, which services one in six U.S. mortgages, has added 11,000 "home retention" workers since the beginning of last year. It has also opened 27 "home preservation centers" and hosted nine workshops around the country where lenders could sit down and discuss their mortgages with a Wells Fargo worker. The bank has also assigned a single employee to each mortgage holder looking to change the terms of a loan.
"We still have a lot of work to do as an industry in terms of reaching customers who don't engage," DeVito said. "But we're getting better at this every day."
JPMorgan employees are going into civic centers and community colleges around the country to host four- and five-day mortgage triage sessions. The company said it is fully staffed up, having hired about 3,600 additional counselors. It has offered 750,000 mortgage modifications to date, including 246,000 under HAMP.
Bank of America, meanwhile, has more than tripled its "default-management" staff to about 16,000 and is still hiring slowly, according to spokesman Rick Simon. Many of the mortgage negotiators have been transferred from the company's loan origination units.
"It's very, very much like writing a new loan, so we've taken a lot of people who might otherwise be out of work," Simon explained. "If there's somebody who has a background in the origination of mortgages, that's a very valuable quantity to have today."
Like Wells Fargo, Bank of America has opened service centers in the epicenters of the real estate fallout -- Arizona, Nevada and southern California. It also has a team of mortgage negotiators driving around the state of Florida, setting up appointments with delinquent borrowers before traveling to meet them near their homes.
The work, however, can be depressing and attrition is a challenge for banks.
"It's a tough job," Simon said. "You have to see that what you're doing as beneficial to people. And you just have to help as many of those people that you can."
Write to Kyle Stock