More censure for handling of foreclosures
Bankers, housing regulators and members of Congress agreed on this much in the week’s second congressional hearing on foreclosure problems: The system needs fixing.
Some bank officials Thursday told a House subcommittee that their efforts to help borrowers in default were stymied by investors who require that foreclosures keep moving forward even as the borrowers are trying to get a modified mortgage to lower their monthly payments.
“It can be extremely confusing,” said Rebecca Mairone, Bank of America’s default servicing executive. “It continues to be a problem. We are directed by investor requirements to do so.”
Other bank officials, and federal regulators, said second loans pose another obstacle to getting more mortgages modified because the holders of both the first and second loans must agree to the modification.
Homeowners may not get payments lowered as dramatically if they have a second mortgage that can’t be modified, and that could lead to redefaults.
The Obama administration’s Home Affordable Mortgage Program (HAMP), launched about 18 months ago to prevent foreclosures, also drew criticism this week.
The government reported Thursday that nearly 755,800 trial and permanent modifications have been canceled through October. Fewer than 500,000 mortgages have been permanently modified since the program started.
But the Federal Reserve predicts there will be 2.25 million foreclosure filings this year and again next year, and about 2 million more in 2012, according to other testimony Thursday.
“I think it’s safe to say that HAMP isn’t meeting its goal of preventing foreclosures,” said Rep. Maxine Waters, D-Calif., who chaired the hearing.
HAMP also has been plagued by complaints that banks lose homeowners’ paperwork and fail to provide modifications after borrowers complete a trial period, which is required before the modification becomes permanent.
Seventeen Democratic senators, led by New Jersey Sen. Robert Menendez, sent a letter to Treasury this week calling for changes to the program.
They included automatic modifications for homeowners who successfully complete the required trial period and creation of a federal office to assist homeowners in getting modifications.
“Countless constituents tell us stories of being stonewalled by banks for very long periods of time; of not being told the reasons for the rejection of their modification request; of significant delays caused by banks losing paperwork; or of trial modifications canceled with no rationale,” according to the senators’ letter.
Source: AZ Republic
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