Promises, Promises . . .
By Consumers Union on Monday, August 10th, 2009
By Norma Garcia
It’s hard not to be extremely skeptical of the lending industry when it argues that it is sincere about doing its part to minimize the number of foreclosures through loan modification initiatives rolled out by the Obama Administration in March of this year. We have been hearing from consumers that loan servicers and lenders are not doing enough to make the most of the programs which are intended to aid individual homeowners avoid foreclosure by continuing to pay their mortgages. On Thursday, August 7, 2009, an Associated Press story noted that only a tiny fraction of struggling homeowners are getting the loan modifications they need from their lenders.
On Tuesday July 28, 2009 key Obama Administration officials and top level representatives of the companies participating in the Home Affordable Mortgage Program (HAMP) sat down to discuss why lenders and loan servicers aren’t making enough loan modifications through the HAMP initiative and what can be done about it.
Once again, the industry promised that it will do more to help homeowners get loan modifications through the Obama initiative. [ADMINISTRATION, SERVICERS COMMIT TO FASTER RELIEF FOR STRUGGLING HOMEOWNERS THROUGH LOAN MODIFICATIONS] I want to remain optimistic that they will deliver but no one knows for sure if that will happen. I’m encouraged to hear that one of the announcement’s from Tuesday’s meeting is that the Department of the Treasury will be more involved in monitoring the participants’ performance and that there will be lender specific public reporting of how the participants are doing. This type of monitoring and transparency will be very helpful in making sure that the job is getting done.
One thing is for sure, if the industry fails to once again deliver, especially in light of this additional governmental assistance and monitoring, it’s time for Congress to jump in and revive legislation providing an important form of relief from foreclosure for homeowners. The right to declare bankruptcy on one’s primary residence, contained in legislation sidelined by the lending industry, may see a revival, should the industry fail to deliver, according to Chairman Barney Frank [Frank Statement on the Progress of Reducing Foreclosures]
This is an approach that Consumers Union endorses.
At this point, the choices are rather simple and straightforward: give struggling homeowners relief through loan modifications or give them the option of declaring bankruptcy on their primary residences. It appears the lending industry has one last chance to get it right before Congress steps in to write the last chapter which undoubtedly will not be to the industry’s liking.
The best solution short of allowing consumers to declare bankruptcy on their primary residences is granting sustainable loan modifications that keep homeowners in their homes, mortgage payments flowing to the lender and communities intact. The power to achieve recovery through this means is within reach but it will be up to the lending industry to deliver more than empty promises to get there.