Another homeowner, Collette Brown, tells a tale of confusion that began in March, when she contacted Bank of America, "and I was told that they weren't ready to even evaluate anyone for the program until April 7."
That's because Fannie and Freddie updated their loan-underwriting software on the weekend of April 4 to incorporate changes under the Making Home Affordable refinancing plan. Brown says that she got a call from Bank of America the evening of April 7, and was told that her application "wouldn't pass through their computer system" and that "I should wait for the Phase 2 of the Obama plan. I didn't even know there (were) going to be phases!"
Indeed, for the Making Home Affordable plan, Bank of America and other lenders are refinancing loans in phases. In the first go-round, banks will refinance home loans that don't have private mortgage insurance. In the second phase, banks will refinance home loans with mortgage insurance.
Bank of America Home Loans is dividing refinances into two phases for a couple of reasons, says the division's president, Barbara Desoer. One is that there is more complexity involved in refinancing loans with mortgage insurance and it takes more time to set up those procedures and train employees. Another is that there are millions of people who hope to refinance and it helps to separate that vast workload into manageable chunks.
This isn't just Bank of America's policy. Under the Making Home Affordable program, most, if not all, lenders are refinancing noninsured mortgages first. They will refi insured mortgages later. But lenders are not describing this policy intelligibly.
Some borrowers come away with the impression that their loans are ineligible for refinancing under the plan, solely because they have private mortgage insurance. Others say they were told they can't refi their insured mortgages because of a software glitch. Still others are told, usually erroneously, that their only option is to refinance into an FHA-insured loan -- swapping private mortgage insurance for government mortgage insurance.
These stories come from customers of many banks, not just a few. Judging by the e-mails they write, these customers aren't dumb. They understand complex explanations. The unavoidable conclusion is that the banks are doing a bad job of explaining their policies to customers. The borrowers listen carefully, and the lenders explain carelessly.
Bankrate has assembled a quiz to help homeowners determine if they are eligible for mortgage help under the Making Home Affordable plan and what steps to take if you are or are not.