Jeff Gelles: Homeowner scraping by, with no help, few answers

Like millions of other Americans, Jack Bleiman has struggled since the air sputtered from the housing bubble and blew the economy into a deep ditch in 2008. Like millions of others, he saw a lifeline in the mortgage modification programs created by the Obama administration in response to the historic rates of foreclosure that resulted.

And like far too many of those millions, Bleiman has seen his hopes unfulfilled - at least so far. Last fall, Bank of America blew through a 30-day deadline for saying yes or no to his application for the Home Affordable Modification Program (HAMP). Despite a slew of phone calls, he says he hasn't been able to get a clear answer why from anyone since.

Neither Bleiman nor I wants to exaggerate his plight. He hasn't watched a seemingly approved modification blow up, as some have. At least so far, he hasn't been inexplicably declined.

So far, in fact, he hasn't even missed a mortgage payment on his Moorestown home, let alone been targeted with foreclosure - a circumstance that, as I'll explain in a moment, seems oddly to be harming him.

But he's had to rob Peter to pay Paul, and cut some dangerous corners. He's had to stop his medical insurance, for instance - not a good choice at 57, when chronic back problems have already forced him from a career as a photographer. And he's built up more than $100,000 on a home-equity line of credit, extended before the bubble burst.

For its part, Bank of America isn't saying much. Spokeswoman Jumana Bauwens says the bank is "looking to see why the account was not processed completely." Strangely to Bleiman, since Moorestown didn't bear its brunt, she said the delay may be linked to a decision to "stop collection activities" in areas affected by Hurricane Sandy - no help to someone still managing to pay.

I'm sharing Bleiman's story because, despite some unusual particulars, it illustrates ongoing problems with HAMP, a program that has done enormous good for those it has helped but that has left others in worse financial distress than where they started.

Years ago, Bleiman started a side business: real estate investment and management. He acquired a handful of homes in working-class neighborhoods in Philadelphia and South Jersey, fixed them up, and became a landlord.

Today, those rents are his livelihood, but the long slump and his tenants' own financial woes have taken a toll. "Insurance has gone up, taxes have gone up, and my income has gone down," Bleiman says.

He's repeatedly been told he'd be better off were he behind in payments, he says. Alys Cohen, an attorney at the National Consumer Law Center, says that while there's a germ of truth to that, servicer personnel often exaggerate it to borrowers. The program is also open to those at "imminent risk of default," but that's a servicer's call, she says.

Bleiman seems to qualify, according to online calculators such as https://CheckMyNPV.com designed to help potential applicants. "NPV" refers to "net present value," a financial term that offers insight into the program's basic aim. HAMP is meant to be a win-win deal that benefits both distressed borrowers and loan owners.

No one really benefits from a foreclosure. The calculator weighs the value of that bad outcome to the loan's owner against the value of a modified loan that keeps getting paid, even with an interest rate that can be reduced to 2 percent to get monthly payments to 31 percent of a borrower's gross income.

According to a January report Cohen coauthored for the center, the program has had considerable success, with more than 1.1 million permanent modifications and a one-year-later success rate that tops 80 percent.

The bad news? The report, "At a Crossroads," says that largely because of "massive servicer noncompliance," permanent modifications had gone to just one in four applicants so far, and that 10 million more homes remain at high risk of foreclosure.

Cohen says Bleiman's long wait is an example of that noncompliance. Applicants are basically at the mercy of mortgage servicers.

"The problem is that homeowners don't have an enforceable right to participate," Cohen says. "The program design is all relying on servicer incentives and government oversight, and that turns out not to work on its own."