Lenders Leave Desperate Homeowners Hanging

As a result of President Obama’s $75 billion dollar foreclosure relief plan being plagued with backlogs and delays, tens of thousands of desperate homeowners are left waiting out in the cold.



Many homeowners are reporting they have left numerous desperate messages that go unanswered for weeks at a time or that their loan modification was denied for reasons that are unclear to them.

The specifics of the relief plan were reveled in March and designed to encourage banks to modify as many as 4 million loans making payments affordable and slowing foreclosures nationwide.

As stated by the Treasury Department, to date over 190,000 homeowners received a payment reduction due to their loans being modified.

Even though RealtyTrac reports that during the same time lenders initiated or advanced over 1 million foreclosure actions.

According to The Center for Responsible Lending, over this year alone 2.5 million homeowners are at risk of foreclosure, and during the next four years over 8 million homes could also be in jeopardy.

NeighborWorks America, an organization that provides foreclosure counseling, reports lenders are taking 60 days or more to respond to desperate homeowners applying for a loan modification.

Many modification applications go unanswered for 6 months or more leaving terrified homeowners uncertain if they will be able to keep their homes at all.

"No one will admit they're doing this," but, "some lenders may not be turning (homeowners) down right away because it might be politically easier to push them off and delay," says Joel Naroff of Economic Advisors.

Naroff also claims that banks are overrun by the demand for mortgages, including refinancing, and it will probably become worse as more homeowners become unemployed.

Lenders say they're doing the best they can with all of the requests, but some industry leaders say that delays are obstructing efforts to bring back the strength in the housing market.

"The loan-modification program is suffering. What we're doing right now isn't working as expected," states Richard A. Smith, CEO of Realogy, the parent company of Century 21, Coldwell Banker, Sotheby's International Realty and ERA. "The delays are horrible. Banks, unfortunately, just weren't geared up for this."

Earlier this month, Senator Jack Reed, D-R.I., along with 14 other senators wrote a letter to Housing and Urban Development (HUD) Secretary Shaun Donovan to try to establish a new approach to get lenders to respond more quickly to homeowners.

The letter stated, "Of particular concern are homeowners who have been instructed by HUD-approved counselors to contact their (loan) servicers only to be rebuffed or, worse, never even reach their servicer."

Other key lenders say it has taken some time due to the delay in the release of the Obama administration’s plan details, but they are now increasing their number of employees in order to process modification requests more quickly.

Loan modifications can assist homeowners by lowering mortgage principal, the interest rate or the term of the loan.

There has also been money placed aside by the government to aid nearly 5 million borrowers with refinancing into non-risky, long-term long term fixed rate mortgages.

Those families who fail to qualify for a loan modification are instructed on alternatives to foreclosure, such as short sales or deeds in lieu of foreclosure.

Treasury Department officers say 16 mortgage servicers have signed up to take part in the program and that they are aware of servicer delays.

"Treasury continues to pursue strategies to help servicers reach more borrowers faster. Given the fragile state of housing markets, we will need to continue to do more to ensure loan modifications are occurring at scale under our program," says Meg Reilly, a spokesperson for the Treasury.

Lenders claim they require enough time to review each application so that the modifications are significant, although some economists caution that rushing approvals may end in modifications that only delay the inevitable foreclosures instead of averting them.

Posted on Tuesday, June 23, 2009 by admin