Consumer Law

Housing Counselors Report ? Needless Foreclosures Continue Apace

By Alan White

The most recent housing counselor survey by the California Reinvestment Coalition reveals the continuing frustration homeowners face as they try to actualize the promises of the mortgage servicing industry.  Counselors report, consistent with my research, that servicers are not willing to reduce principal, and tend to favor workouts that increase the borrower?s monthly payment rather than reducing it.  Response times are nowhere near the 45-day guideline adopted by HOPE NOW.  Foreclosures are proceeding while frustrated borrowers and counselors make vain efforts to communicate with loss mitigation staff to craft reasonable long-term solutions.  Servicers still prefer temporary adjustments to payments and interest rates than permanent loan modifications. 

In the absence of clearer and stronger leadership from FHFA, Treasury and FDIC, servicers are still in denial, acting as if the downturn is a problem of a few months? duration, and that the mortgages made in 2005 and 2006 can be repaid eventually, if we just keep kicking the can down the road.  Here are some counselor comments from the report:

?    ?Right now with our current pipeline of foreclosure clients, we are waiting for responses from servicers, which are now at the 4th or 5th month, even with constant follow-up.?

?    ?Repayment plans most often do not work because they typically increase the monthly payment; they seem to be done hastily, just so the servicer can report that they have ?done x # of modifications.? Foreclosure is the most common outcome, followed by modifications that lower the interest rate. We have only seen one principal reduction on a first mortgage and that just happened at the end of September ?08.?

?    ?LOL! God only knows what these servicers/investors are waiting for! The greater depression of 2008? They are still digging their heels in, but the recent movement by the FDIC-owned IndyMac, Countrywide and FHA H4H is a huge step in the right direction. Let's see if other lenders will follow suit and how many H4H actually get originated...?

?    ?Writing down the principal would help all clients stay in the home and would slow down the amount of foreclosures currently taking place. This would be a good step towards halting the high number of foreclosures occurring everyday. It is a much-needed remedy. These homes? prices should have never reached these levels and because of greed, and deregulation, it created an environment in which we find ourselves today.?

?    ?We have noticed write-downs only when a lawsuit is filed.?

?    ?Most of our clients have some income and can sustain a mortgage if they reduce principal.?

To hear from frustrated California homeowners themselves, you can watch this video.

Full post as published by CL&P Blog on December 04, 2008 (boomark / email).