Sloppy Mortgage Modification Process Still Impeding the Recovery

Published on June 29th, 2011
Written by Public Record Finder Staff

In a recent article, we reported on the tumultuous state of the housing market and renewed fears of a double-dip recession from economists. At the crux of the issue is the surfeit of homeowners that are currently being foreclosed on -- not to mention the thousands of others who are months overdue. Banks have become so inundated with mortgage modification requests that delinquent borrowers often go months or even years without being foreclosed on.

The Obama Administration tried to stave off the rampant rate of foreclosures early in 2009 with the $75 billion Homeowner Affordability and Stability Plan (HASP), an initiative designed to help homeowners refinance and decrease monthly payments to roughly one-third of their monthly income. By most accounts, however, the program has largely been a failure despite $200 billion in additional funding from the beleaguered government-sponsored enterprises Fannie Mae and Freddie Mac.

One of the main reasons so many people are in homes they cannot afford is predatory lending, which was a common practice in the decade leading up to the meltdown. The newly founded Consumer Financial Protection Agency was supposed to curtail these activities, but that hardly seems the case. Aptly named robo-signing scams, in which ill-qualified employees unscrupulously signed off on thousands of foreclosure affidavits, have made headlines in recent months.

Earlier this week, Pro Publica released a story investigating the nefarious loan practices that major lenders continue to employ. Even after receiving approval for modifications from the bank, many owners are still being reported as delinquent to credit rating agencies due to mismanagement of the paperwork and oversight from the bank. According to one nonprofit in Connecticut, as many as one-quarter of cases were subject to the aforementioned scenario.

But not all of the blame can be placed on the ill-managed and understaffed banks; regulators have been asleep at the switch as well and are only now moving to establish common sense rules for handling this arcane process. Homeowners can avoid some of these challenges by taking matters into their own hands and diligently reviewing their financial contracts and other pertinent public records.