Even as Bank of America prepares to move forward with more than 100,000 foreclosure filings, the head of the country's leading housing counseling agency praised the bank -- calling it the best among its peers in working with the agency to keep people in their homes.
The Neighborhood Assistance Corporation of America, or NACA, holds events across the country that bring banks, housing counselors and homeowners together to restructure unaffordable mortgages.
In a tough economy, some economists say banks would rather make less money on a mortgage than force people out of their homes -- and then be stuck trying to sell them. Others say major lenders have been geared for maximum profit, and aren't changing now.
"The best bank that we work with during the events that is getting it done is Bank of America, by far," NACA CEO Bruce Marks said in an interview. "They are much more responsive to addressing the issues."
Marks said that of the thousands of Bank of America customers who attend the events, 60 percent receive approvals for loan modifications within a day. Wells Fargo comes second, offering "same day solutions" to about 40 percent of its customers at NACA events, he said. The 12 to 15 mortgage lenders present at most events -- including Citigroup and the mortgage lending arms of Goldman Sachs and Morgan Stanley -- average about a 30 percent same-day approval rate.
The reason banks are able to offer speedy approvals at the NACA events, Marks said, is that NACA counselors work with homeowners to determine how much they can afford to pay each month. They then bring this information, along with necessary documentation like income statements, to bank staffers, who approve interest rate reductions and, in some cases, principal reductions.
"We do the work, and they do the approval," he said.
Banks like BofA pay NACA a fee -- between $500 and $750 -- for every loan modification in which customers make on-time payments for at least three months. In a separate program, NACA also helps broker new loans for Bank of America and Citigroup, a service for which the group is paid $2,500 per loan.
Marks said his group's financial relationship with Bank of America did not influence his glowing assessment of the bank.
Bank of America has the highest same-day approval rate, Marks said, because the bank is "the most open to new ideas and new ways of doing it."
Banks Not Structured to Do Loan Modifications
It wasn't always this way. Some two years ago, Marks said that his group met with resistance from Bank of America and others. Today, he said, banks recognize that "it makes business sense to provide solutions right then and there as opposed to stretching it out."
In an e-mailed statement, Bank of America credited NACA with preparing the documents necessary for loan modifications and bringing "the package to the bank ready for a solution in most cases."
"As a result, we have a relatively high rate of execution of modification offers made at NACA events," the bank said.
Overall, the bank says it has completed more than 680,000 loan modifications since the start of 2008. Still, critics, including Marks, argue that BofA and its peers haven't devoted enough of their own resources to make loan modifications run more smoothly.
"The big banks have not done what they promised to do over and over again," said Kathleen Day, a spokeswoman for the Center for Responsible Lending. Homeowners seeking loan modifications from banks find a host of obstacles, like the banks losing their documentation, and then "foreclosure happens before they can get the loan modification," she said.
The problem, said Marks, is that lenders' loss mitigation departments have traditionally focused on collecting additional payments from those who have fallen behind on their mortgages or on executing foreclosures.
"It's an industry model that doesn't work with the current situation," he said.
Most recently, banks are facing allegations that some of their employees served as "robo-signers", signing foreclosure paperwork without reviewing it. Amid the controversy, Bank of America earlier this month halted foreclosures across the country.
The bank now plans to lift the foreclosure freeze next week by resubmitting foreclosure documents in 102,000 cases to courts in 23 states.
The bank has "not found information which was inaccurate which would affect the plain facts of the foreclosure," Brian Moynihan, BofA's CEO, said Tuesday.