Source : Business Times - 21 Apr 2009
Mortgage businesses working hard to keep lines of communication open with its customers
Gabrielle Sindorf has been trying to lower the 9.95 per cent mortgage rate on her US$500,000 home in Croton-on-Hudson, New York, since her husband died in December.
Sometimes no one picks up when she calls the help line at American Home Mortgage Servicing Inc, the company that collects her monthly payments, Ms Sindorf said. When she spoke to a supervisor, she said he put her on hold and never came back.
President Barack Obama is counting on banks to help revive the economy by refinancing home loans for as many as five million borrowers and modifying the mortgages of another four million who don’t qualify for refinancing. Lenders, swamped by customers, miss an estimated 750,000 calls a month, which could translate into about 125,000 mortgages added to the 850,000 that are made monthly, according to Guy Cecala of Inside Mortgage Finance.
‘The world will be surprised how slowly the industry will implement the administration’s programmes,’ said Mr Cecala, chief executive officer of the Bethesda, Maryland-based trade publication. ‘Mortgage companies don’t have enough people to process loans.’ Since the housing bubble burst two years ago, lenders have cut staff by 44 per cent to about 280,000 from more than 500,000, according to data compiled by the Mortgage Bankers Association in Washington.
On March 4, the day the administration announced details of its Homeowner Affordability and Stability Plan, phone calls doubled to JPMorgan Chase & Co’s Chase Home Lending unit, the fourth-biggest US mortgage servicer, according to spokesman Thomas Kelly. The next day, calls doubled again, he said.
‘The surge in demand is more than we expected,’ Mr Kelly said.
Chase added 300 employees to its mortgage modification team during the last two months of 2008 and now has 2,800 loan counsellors working on restructuring mortgages, Mr Kelly said.
Because the mortgage business is so up and down, getting the right level of staffing is difficult, he said.
Christine Sullivan, a spokeswoman for Irving, Texas-based American Home Mortgage Servicing, said the company worked hard to keep lines of communication open with its customers.
‘Like all mortgage servicers in today’s environment, we are experiencing high call volumes,’ Ms Sullivan said in an e-mail response to questions. ‘We never like to hear that a borrower feels we have not been responsive to their needs.’
Wilbur Ross - the New York billionaire who heads the buyout firm WL Ross & Co - paid about US$500 million in October 2007 for the servicing unit of bankrupt Melville, New York-based American Home Mortgage Investment Corp Mortgage servicers which collect monthly payments and handle borrower delinquencies.
Ms Sindorf, 53, said she owes US$355,000 on the US$500,000 house she and her late husband Bob bought in 1994. She said she’s tried three times to confirm the owner of her loan and gotten three different answers from American Home Mortgage Servicing.
‘They torture you, let’s face it,’ said Ms Sindorf, who has four children. ‘I’m trying to stay in this house because I have a nine-year-old and I don’t want to move him. I feel like a piece of paper flapping in the wind.’ American Home Mortgage Servicing added 650 employees this year, bringing the work force to almost 2,500, Mr Ross said in an e-mail. They closed 6,500 loan modifications in March, and this month, through April 14, they answered calls on average in 19 seconds, with customers hanging up at a rate of 1.94 per cent of the time. Ms Sullivan said the industry strives for a so-called abandonment rate of less than 5 per cent.
‘Many of the callers are in a tattered emotional state due to the loss of a spouse, a job loss or a health problem so their perception of how long they have been put on hold may not be accurate,’ Mr Ross said in an e-mail.
Communication problems cut both ways, said Thomas Marano, chief executive officer of GMAC LLC’s Minneapolis-based Residential Capital LLC unit. ‘One of the biggest challenges out there is getting through to the consumer and letting the consumer know that they have a solution,’ Mr Marano said. ‘We want to qualify as many people as possible and keep them in their homes.’ GMAC, the sixth-biggest US mortgage servicer, is planning to modify 100,000 home loans under the Obama plan this year.
Jay Brinkmann, the Mortgage Bankers Association’s chief economist, increased his estimate for 2009 home-loan originations to US$2.78 trillion from US$1.98 trillion, citing the drop in interest rates, the Federal Reserve’s plan to purchase US$1.25 trillion of mortgage-backed securities, and the administration’s US$75 billion programme to help financially strapped borrowers stay in their homes.
The average US interest rate for a 30-year fixed-rate loan was 4.82 per cent as of April 16, according to McLean, Virginia-based Freddie Mac. The average rate was 4.78 per cent on April 2, the lowest since at least 1971, Freddie Mac said. Mortgage rates will probably stay in that range for the rest of 2009, Brinkmann said in an interview.
‘People shouldn’t panic,’ Mr Brinkmann said. ‘Even if we have capacity restraints right now, chances are rates will be down at this level for a significant period of time and the loan applications will work their way through the system eventually.’ Another impediment to mortgage lending is the diminishing sources of short-term loans, known as warehouse loans, Mr Brinkmann said. Banks extend warehouse lines of credit so mortgage originators can hold the loans before they sell them to companies such as Fannie Mae and Freddie Mac. Without the credit lines, lenders can’t write new loans.
JPMorgan in New York and Pittsburgh-based PNC Financial Services Group Inc shut their warehouse-lending units during the past two months. Warehouse lending fell to US$25 billion last year from more than US$200 billion in 2007, the Mortgage Bankers Association said. San Francisco-based Wells Fargo & Co, the second-biggest US home lender, may open a unit to provide the short-term loans.
‘Warehouse lending is extremely important, especially to independent mortgage bankers who don’t have the resources of a Wells Fargo,’ said David Reed of CD Reed Mortgage Bankers in Austin, Texas. ‘Warehouse lenders are reducing credit lines for no other reason than they want to reduce their exposure, not necessarily anything the borrowers have done. If your credit line is reduced, your limit on writing mortgages is reduced.’ Bank of America, Wells Fargo, JPMorgan and New York-based Citigroup Inc together service half the home loans in the US, according to Inside Mortgage Finance.
At Charlotte, North Carolina-based Bank of America, which acquired Countrywide Financial Corp, the biggest US mortgage lender and servicer, in July 2008, loan servicing staff has grown to 6,000 from 1,500 two years ago, said spokeswoman Jumana Bauwens.
The number would be higher except for jobs that were cut as the two companies were combined, Ms Bauwens said.
Citi Mortgage, a Citigroup subsidiary, added 200 workers in recent months to handle increased call volume, according to spokesman Mark Rodgers. Wells Fargo beefed up its loan workout team to 1,000 from 200 over the past one and a half years and doubled the loss mitigation and default staff to 8,000, spokesman Kevin Waetke said.
‘We still do not have enough mortgage originators for the demand,’ said Christine Clifford, vice-president of Wholesale Access Mortgage Research & Consulting Inc in Columbia, Maryland, which works with lender call centres. ‘I’ve never seen it like this before and the problem is getting worse, not better.’ Ms Sindorf’s 9.95 per cent interest rate is well above the national average of 4.82 per cent. She said she’d like to refinance, if she could only reach someone who could help her at American Home Mortgage Servicing.
‘How hard is it to drop an interest rate?’ Ms Sindorf said.
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