Foreclosures Continue Due to the Failure of Lenders to Alter Loans (Part I)

The $75 billion program by the Obama government intending to cut down on foreclosures for sale has suffered major setbacks. A major chunk of homeowners complained about certain inaccuracies in the information by the lenders and many more commented that they did not receive any help.

This plan by the Obama administration primarily intended to avoid at least 4 million foreclosures from coming into action. This mainly needed the banks to alter the loan structure into a comparatively affordable deal for the borrowers.

This plan has resulted to alterations in above 190,000 mortgages as observed by the Treasury Department. As noted by RealtyTrac most of the lenders had almost taken to legal proceedings of foreclosures against 1 million homeowners and above. Out of this approx, 20% of the homes, went through foreclosure and were repossessed by the banks.

Almost 2.4 million Americans are prone to facing foreclosures in 2009 according to the Center for Responsible Lending. They further emphasize that at least 8.1 million home might be foreclosed during the upcoming four years.

According to most homeowners attempting for alteration in their loans, the banks are not responding to their demands within 45 to 60 days. This point was strongly emphasized in the monthly report of NeighborWorks America, which acts as a counseling agency for prevention of foreclosures.

The homeowners applying for mortgage alterations are still in a perilous condition as they are unable to arrange for money to pay the monthly amounts and this has added to their uncertainty about retention of their homes.

According to Joel Naroff from Naroff Economic Advisors, “Some lenders may not be turning (homeowners) down right away because it might be politically easier to push them off and delay. No one will admit they’re doing this.”

Naroff further stressed on the fact that currently the banks are faced with maximum number of requirements for mortgages and re-financing options too. This situation will worsen with the growing joblessness among the homeowners.

The defaulting with mortgages has mainly increased in those areas where joblessness is on the rise. In fact, the homeowners who have successfully got their loans modified may face trouble if there is a fall in their income levels or in the prices of the homes.

Though the lenders claim that they are trying greatly to deal with the increasing number of requests but according to the officers, despite the attempts to bring about a turn around in the real estate market, these backlogs are having negative impacts.

The CEO of Realogy, the parent body of Century 21, Coldwell Banker, Sotheby’s International Realty and ERA, Richard A. Smith observed that, “The loan-modification program is suffering. The delays are horrible. Banks, unfortunately, just weren’t geared up for this.” This seemed more like a difficult situation for the banks to act so fast in response to so many requests of loan modification from so many borrowers.

Jack Reed, D-R.I., including 14 more senators attempted to write a letter to Shaun Donovan, the Secretary of the Housing and Urban Development (HUD) requesting for a new means to ensure that the lenders take actions in support of the homeowners more promptly. According to this letter, “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.”

Since February, Robin and Craig Doyle staying in Woodland Hills, Calif., were trying incessantly to get their loan modified with the help of their lender JPMorgan Chase. Robin being a freelance writer was advised to send a letter about her difficulties and to mention her paycheck counterfoil, and tax returns among her personal information. Despite sending a huge amount of information within a month, she was asked to update her details and send another file as this information was outdated. This entire procedure became futile for her.

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