Foreclosure: Saving House Owners From The Foreclosure

Posted in Foreclosure, November 28th, 2007 |

The houseboat is drowning being lashed by the foreclosure typhoon. It must be saved. Counselors are throwing a lifeline in a desperate attempt to keep it afloat. Although more houses are going under, the positive sign is that at least some are being towed back to land.

It brings back a smile to the lips of counselor Melissa Hansen as some lenders have agreed either to slash loans or even lower interests from the original teaser rate! A branch of Twin Cities Habitat for Humanity is a non-profit organization that has shifted its focus from helping people to build houses to saving these from foreclosures. Counselors have never been happy in their dealings with loan servicers because the latter claimed that they only collected dues – they had no authority to change the original agreement. This argument does not hold good during these days of crisis. About 2.2 million Americans are about to succumb to foreclosures in 2008. Interests are rising making it impossible for them to continue with the payments. Consequently the mortgages have to be foreclosed. Fortunately due to pressure from all sides including the self-interest of the lenders, the servicers are beginning to soften and being more amenable to reason. Credit markets are running dry, Wall Street is edgy and Bush himself asked the servicers to modify terms. The carrot and stick policy is beginning to pay dividends with the Congress warning of new laws to rein in mortgage lending rules.

To add spice to the sauce an industrial trade group, American Securitization Forum having 350 members including investors, servicers and insurers, spoke openly about encouraging loan modifications to halt the march of foreclosures. As per their calculations two out of every three loans the servicers deal with have no restrictions imposed by the original lenders. Servicers are afraid of being sued by the lenders but the forum is allaying their fears.

The counselors are happy with the first signs of the weather clearing. About 20% of their clients have been benefited from loan modifications. It is a record of sorts. Their work has also increased. Last year they handled 152 cases but this year the number has already touched 206. Some of the most stubborn lenders are beginning to realize that it is better to bend rather than not break – given the magnitude of the foreclosure numbers.