Foreclosure Crisis – Lenders Are Talking And Talking Only

Posted in Foreclosure Crisis, October 12th, 2007 |

Foreclosures have become a socio-economic problem of jumbo proportions. Local groups have been formed supported by the government, to involve lenders in a more proactive manner but the latter are only talking – not doing anything. Of the borrowers 57% bow to foreclosures and 33% to short sales when they are unable to meet rising mortgage costs. Lenders have been approached to negotiate but they agree to only short-term solutions, which does not touch the core of the problem.

The Community Housing Development Corporation of North Richmond is busy with foreclosure related activity. One counselor opines that the lender offers repayment plans but is reluctant about modifying loans. They are asking for the impossible. If the borrowers had that kind of money they would not have been in this foreclosure soup. With cash gone and credit card scratched off how will the borrower talk? The monthly average is that out of 50/60 coming with hope only 10 see the light of day. For the others it is the inevitable foreclosure.

A report given out by California Reinvestment Coalition was important because it triggered off a debate and focused on the ambivalent role of the lender in this foreclosure crisis. The general opinion is the lenders can do much more than what they are doing now. The Coalition scrutinized 33 certified housing agencies in California, which had attended to about 9,8000 customers personally in August. Only 1% of the sub-prime loans got modified.

The mortgage industry does not agree with these findings. At the root is the point that lenders do not benefit from opting for the foreclosure process. Each case of default is individual specific and no rule of thumb applies to all. It requires going through details and working out matters from person to person. Previously except for a death, divorce or job loss such considerations of workouts never arose. Some of the lenders complain that in the previous year 30% of those who went into foreclosure did so without even contacting the lenders.

Lenders have become part of HOPE NOW that is working in collusion with the federal government to reach out to the hapless borrowers around whose necks the noose of foreclosures are tightening. Bank of America stated that since they are not in the sub-prime business they have not been much affected by the foreclosure crisis.

Via