Betsy Berry was worried she would lose her home just outside of New Orleans. Though she had never missed a payment on her mortgage, she says, Bank of America was demanding thousands of dollars worth of late fees, and threatening to take her home if she failed to pay.
But when she called her lender in October with the hope of eliminating the fees, more confusion ensued, she says. Banks had pledged to assign borrowers a single point of contact in earlier agreements with regulators and the federal government. Still, she found herself talking to five different people in the space of two days.
First, she spoke with a Bank of America employee named "Shane," who referred her to "Pamela," she claims in a lawsuit filed recently on her behalf in New Orleans federal district court. The next day, she talked to "Debra," "Jarquis" and "Jennifer."
None of these people solved her problem, Berry alleges in the lawsuit, leaving her to continue sliding to the brink of foreclosure. A few weeks later, frustrated, exhausted, and worried about the consequences of her rapidly deteriorating credit, Berry sent Bank of America a check for $5,556, she says.
"I felt like I was about to go off the deep end," she told The Huffington Post, explaining her decision to pay a bill she insists she never owed. "I am somewhat of a control freak, but I couldn't fix this."
In February of last year, five large banks, including Bank of America, agreed to a $25 billion settlement with 49 state attorneys general and federal authorities to resolve broad-based and persistent claims that they mishandled home loans in crisis. The banks were accused of charging improper fees while dispatching homeowners on customer service misadventures that often terminated in foreclosure. On Thursday, Bank of America and other mortgage companies -- 13 in all, this time -- finalized a separate $9.3 billion settlement with federal bank regulators to resolve similar claims.
The settlements also required the mortgage industry to revize loan "servicing" practices -- how it manages homeowner accounts -- widely seen as unfair and damaging. The deadline to make those reforms was Oct. 1. Banks may face fines of up to $1 million for each violation.
Berry will receive nothing under these high-profile legal deals, even though she claims the same types of abuse that the settlements were meant to resolve. She is not alone, consumer advocates say. While these agreements have led to an uptick in aid for some borrowers, for many others, the deals might as well have happened on a different planet.
Of the 8 million or so homeowners who received a foreclosure notice over the past five years, several million will likely never see a dime in aid, experts said. And many of those who will get assistance are expected to receive small payments that will begin at $500.
"The settlements are unlikely to provide meaningful relief to any significant fraction of any of the homeowners it sets out to help," said Diane Thompson, a foreclosure lawyer at the National Consumer Law Center.
Instead, she said, the deals are "window dressing." They require banks to meet certain financial targets, but don't require they direct money to help struggling borrowers avoid foreclosure, she said.
Berry’s problems stemmed from what seemed at the time like a wise financial calculation. She had bought her home in 2005 when interest rates were relatively high. When she asked the bank about refinancing, a customer service representative suggested instead she apply for a government-sponsored loan modification. The end result would be the same: lower monthly payments, which the single mother of two said would be a big financial help.
Though the bank offered an interest rate reduction, it never offered Berry a reduction in the principal she owed, the most coveted form of aid under the attorneys general settlement.
And because Berry did not receive a foreclosure notice in 2009 or 2010, the eligible window for the second settlement, she does not qualify for one of the payouts that will go to 4.4 million homeowners.
Bank of America did not comment for this story, but recently said it provided "meaningful relief" to 330,000 borrowers in the first nine months after the attorneys general settlement was reached. The bank said it was on track to meet its obligations by the end of the first quarter of 2013.
As The Huffington Post recently reported, much of that help went to short sales and to extinguishing second mortgages, forms of aid that homeowner advocates say is not always helpful.
All told, the five banks that signed last year's agreement, which also include JPMorgan Chase, Citigroup, Wells Fargo and Ally Financial, have distributed some sort of assistance to 550,000 borrowers, according to a recent report by the court-ordered monitor appointed to oversee compliance. The monitor, former North Carolina banking commissioner Joseph Smith, said he had not confirmed most of the reported results.
Regulators who helped draft the legal settlements have defended them as the best tools to provide broad relief to homeowners struggling to stay current on their payments. While acknowledging the agreements will not help everyone, they say they have already had a meaningful impact.
Shaun Donovan, the secretary of Housing and Urban Development, recently said that the mortgage monitor's report "marks a major milestone in our efforts to assist struggling homeowners."
"The banks have reported completing many actions to complete deficiencies," said Bryan Hubbard, a spokesman for the Office of the Comptroller of the Currency. "Regulators are in the process of validating that work."
But even a brief analysis of available data presents a challenge to the notion that the settlements have provided meaningful relief to homeowners.
During the last three months of 2012, with the attorneys general settlement by then in full force, mortgage companies initiated 383,000 "home retention actions," which include modifications, according to the OCC. That represents a 16 percent decrease compared to the same period a year earlier -- before the settlement took force. Over the same period, completed foreclosures rose 1.3 percent to 115,000. The data includes numbers reported by all five banks party to that deal.
Though results for one three-month span do not necessarily indicate whether or not the settlements are working, the data underscores what consumer advocates say is one of their biggest complaints about the two settlements: Both deals permit the mortgage industry to claim credit for actions it was already taking under the government's Making Home Affordable program, which pays banks with taxpayer bailout money to modify mortgages. Mortgage companies have completed 2.7 million permanent modifications since the program began in 2009, well short of the original target of 4 million. There is no way to ascertain whether the companies might have offered more or fewer modifications absent the settlements' mandates.
By most accounts, the mortgage companies will easily comply with legal requirements that they collectively allocate $35 billion in relief. But whether they are living by the obligation that they improve their servicing standards will likely be more difficult to determine.
Sara Manaugh, an attorney with the Foreclosure Prevention Project at South Brooklyn Legal Services in New York, said her office has recently focused on timelines mortgage companies are supposed to follow for approving or rejecting loan modification applications. In her experience, "nothing much has changed," she said, adding that the industry continues to blow deadlines. For example, banks are supposed to acknowledge the receipt of a modification package and provide a list of missing docs within 10 business days, but that rarely happens, she said.
As a result, homeowners are saddled with more late fees, more harm to their credit, and are pushed closer to foreclosure, she said.
Another requirement under the two settlements -- one of the most important, advocates say -- is that banks halt all foreclosure proceedings while a homeowner is in the process of applying for a mortgage modification. But borrowers still complain of "dual-tracking," as the process is known.
Cynthia Sheppard first applied for a modification on her Citrus Heights, Calif., home in November of 2011. Over the next nine months, she faxed the same paperwork to Bank of America dozens of times, she said, all in an attempt to lower her monthly payment from $2,500 a month. The foreclosure notice came in early August of last year. A few weeks later, the bank sent her yet another modification application, which she filled out and returned. Her home was sold at auction on Sept. 12, she said.
Banks are also supposed to designate a single contact for each struggling borrower. Doing so does not guarantee an end to frustrations, but at least means that borrowers will not have to explain their problem anew each time they call, experts say. But Berry said she talked to dozens of people at Bank of America over two years.
Though she was able to refinance, she is paying a higher interest rate than she would have otherwise because of her damaged credit, Berry said. The experience cost all of her savings, along with retirement money she pulled out of her 401(k) account.
"This has consumed me," Berry said, her voice shaking. She paused. "I'm sorry. I can't talk about this without getting upset all over again."