U S Treasury Takes Next Step to Prod Mortgage Companies to Help Struggling Home Owners
Ever since the start of the Making Home Affordable Modification the mortgage companies have been slow in processing applications for loan modifications for people facing foreclosure. Numerous times in past posts here on my blog I have commented on how poorly the companies have treated these people.
Up until now the mortgage companies have controlled the loan modification process and any other steps people undertook to try to save their homes from foreclosure. The companies did what they wanted without regard to the people they were supposedly helping, nonprofit organizations, and city, county, state and federal governments. In normal times they got away with this.
Back in the Good Old Days
The number of foreclosures at any given time was low. It was beneath everyone’s radar. No one really paid attention to what was happening. Back in those days, there were no real attempts to help people avoid foreclosure.
If people were behind on their house payments, the mortgage companies just took the amount they were short, added interest and penalties to it and tacked it onto the balance owed. They took the total and typically divided it by a certain number of months and added that amount to the monthly payment. The person facing foreclosure was advised what the mortgage company had done. They were also told that their new payment monthly would be that inflated amount. When they paid the total off, their monthly payment would drop back to what it had been.
The people were responsible for making the larger payment. The mortgage companies didn’t care where or how they came up with the money. They just expected the people to get it. If they couldn’t, the mortgage companies didn’t care. They just went forward and foreclosed on the homes.
Those Really Weren’t Good Old Days, Were They?
I am sure you would concur with me that if the American public knew what was happening, they would have been outraged. Yet because of our ignorance mortgage companies got away with it.
As the foreclosure crisis has grown and reached epidemic proportions, far more attention has been placed on the mortgage companies and how they handle foreclosures. The initial programs introduced by the Federal Government requested the mortgage companies to do certain things voluntarily. They never did and the programs failed.
The Making Home Affordable Modification Program
In March of this year, a new program was rolled out by the new administration. The Making Home Affordable Modification Program was introduced. On paper it is a great program. It called for loan modifications where the monthly payment of a person facing foreclosure would be reduced to 30% of their gross income. This would enable many more people to save their homes than were ever able to in the past.
There was only one major problem. There were no penalties in it for mortgage companies if they did not follow through on modifying loans as specified in the program. There were certain cash incentives built in; however, these were not large enough to make it advantageous for the mortgage companies to modify loans.
So the mortgage companies continued to do as they had been doing, not really modifying loans or attempting to do so and blaming it on the people who were facing foreclosure. They said that the people who had financial challenges were not submitting the necessary information to them. They were uncooperative.
There Was One Big Difference
The problem was too big. There were too many foreclosures. There was too much attention focused on the mortgage companies. Too many people were complaining about how uncooperative these companies were. Reporters investigated and found that most complaints were legitimate. The U S Treasury and the Department of Housing and Urban Development which oversaw the Making Home Affordable Modification Program had to do something.
The Monthly Servicer Reports
At the end of July executives from the mortgage companies were called to a meeting in Washington with high level officials from the U S Treasury and The Department of Housing and Urban Development. At this meeting they were told that their performance had to improve. They also were told that beginning in August the U S Treasury would start to release monthly reports on. These reports would show what each mortgage company was doing with their loans in the Making Home Affordable Modification Program.
Each month since then reports have been released. These have shown that the mortgage companies have really been doing a horrible job with loan modifications. The mortgage companies have put their own spin on their poor performance. Some have said that they are proceeding cautiously with modifications because they want most of the people to whom they give modifications to be able to save their homes. Others continue to blame the people who have requested modifications for not submitting required information to them.
The Latest Problem
For the most part trial loan modifications started in July. These trial modifications last three months. If the people to whom these are given make their payments on time, they are supposed to be converted to permanent modifications.
No statistics have yet been released on how may trial modifications are being converted to permanent ones. However in the last two weeks, information has been leaked that only 1% have been converted to permanent modifications.
Mortgage companies are again blaming the people for not submitting the necessary paperwork. Housing Advocates and non-profit groups who represent people facing foreclosure are fed up with the companies. They are clamoring for a change. They want the administration to take more aggressive action to make sure that the companies modify loans for people as required. The administration should run the program and make sure that people facing foreclosure should get the modifications that they need.
The Treasury’s Response
On Monday, November 30, officials from the Treasury Department took the nest step to prod mortgage companies to help people facing foreclosure. They announced that they were going to monitor the mortgage companies more closely. They threatened to penalize companies that don’t do enough to help people requesting modifications.
They added that they are going to issue report cards to mortgage companies and there will be consequences including financial penalties and sanctions for those which perform poorly.
The mortgage companies need to be brought under control. They need to be working with everyone to help people facing foreclosure save their homes. They cannot continue to work against them each step of the way. Those companies that don’t change should have to pay large financial penalties.
Changes in the Making Home Affordable Modification Program are being made very slowly. There is no indication of when this program will start to work as it was intended to. Until that occurs, people facing foreclosure who apply for loan modifications will continue to experience the same challenges that people are experiencing right now.
If you are facing foreclosure, don’t expect that you will have it easy. Expect to do battle each step of the way. Don’t try to negotiate a loan modification by yourself. Get a lawyer or an expert in loan modifications to help you. Also find out as much as you can about the foreclosure process and steps you can take to save your home. There is much information on this in my EBook. Please check it out by clicking Stop Foreclosure.
Much Success,
Mark Elkins
