Three years after the foreclosure crisis began, the process to apply for a loan modification remains a bureaucratic nightmare that is complicating the housing recovery and could dull the impact of any Obama administration initiatives in the works.
“The administration’s biggest foreclosure-prevention effort, the Home Affordable Modification Program (HAMP), targeted to help 3 million to 4 million homeowners, has reached only about a quarter of that since its 2009 inception” says Rueters.
“Servicers have dragged their feet on providing wide-scale modifications. They continue to lose documents, use inaccurate numbers to issue denials, or both approve and deny applications at the same time, according to housing advocates.”
“It delays resolution of the problem of defaulting loans and it is adding uncertainty to the market,” said Susan Wachter, a housing expert at the Wharton School of the University of Pennsylvania.
Around one in every 12 mortgages in the country is delinquent, and only a fraction of them have received modifications.
“Somehow the borrower is unreachable, or the servicer hasn’t found the right way to reach
the borrower, but the fact is, we see (modifications) piercing maybe 10 to 25 percent of the potential population,” said Diane Westerback, a managing director of global surveillance analytics at Standard & Poor’s.
The majority of homeowners, advocates say, still get stuck in byzantine mazes, with no real enforcement mechanism to pursue under HAMP.
“If you get a minor traffic ticket, you get a right to an impartial hearing, but if you are applying for federal home saving assistance, the bank is judge, jury, and executioner,” said Joseph Sant, a lawyer at Staten Island Legal Services who helps defend homeowners facing foreclosure.
“These are institutions that have taken a huge amount of bailout money. There should be a level of responsibility to communities,” said Josh Zinner, an advocate with the Neighborhood Economic Development Advocacy Project in New York. “HAMP is far from perfect, but the biggest problem is servicers not doing their job.”
Bank are continuing to drag there feet with loan modifications. Most of our clients have tried to receive a loan modification on their own before they came in to see us. They usually are just fed up with the lies. There are so many people out there that qualify for a loan modification and the banks just wont help. The quicker homeowners get their loans modified, the quicker the recession will end.