Insufficient Medicinal Doses For Disease Foreclosure

Posted in Foreclosure, January 10th, 2008 |

What has been done in 2007 is hardly sufficient to tackle the foreclosure epidemic in 2008. The call of the hours is that the state and the federal powers must take effective steps to control sub-prime mortgages. Currently the industry has gone into retreat. During the last third quarter of 2007 lenders advanced $26.3 billion as sub-prime loans – albeit it was down by more than 80% in comparison to approximately $139 billion that was given out during the boom period of the fourth quarter 2005. However – for the moment it has gone into hiding and it is inevitable that sooner or later it will surface again. The problem remains – although in wraps.

In 2007 several plans were trumpeted to help foreclosure victims. In August the Federal Housing Administration offered to help 250,000 victims to refinance. In December the mortgage giants agreed to freeze about the same number of loans. The Federal government passed The Mortgage Forgiveness Debt Relief Act on 20th December to give income tax relief to those who were able to get a part of their loan forgiven by the lenders.

Countrywide became a pioneer in these activities targeted to help foreclosure victims. It refinanced loans of 77,090 borrowers in November. It has increased its pace of activity. About 15,472 borrowers have been helped in November. Countrywide won laurels for modifying the loan of Neighbourhood Assistance Corporation, based in Boston. The latter had been criticizing the mortgage industry for a long time.

Further steps were taken by Federal Reserve to check various practices of mortgage industry like charging penalty for refinancing. This action made it gain popularity. Consumer advocates were however not slow in criticizing its impact on the market.

Massachusetts went on ahead by imposing the strictest set of mortgage laws and rules. What the Feds limited – it chose to ban. The items under stricture were penalty fees and bonus for mortgage agents who sell loans for high interest.

Borrowers however are critical. They say none of these steps have enough punch in them. Only a change in Federal law can allow bankruptcy courts to modify mortgages. Currently only mortgages on first-time houses are the ones courts can touch. A fundamental change in law would authorize judges to seek reasonable payment terms for borrowers filing for bankruptcy protection. It would also allow for tackling multiple claims on a single mortgage.