Carrots and Requests are Not Having any Effect on Banks to Prevent Foreclosures

Carrots and requests are not having any effect on banks to prevent foreclosures – they are going along their own way not making loans permanently modified, despite inking contracts. The borrowers are observing their side of the deal but the banks, without fear of any reprisals are continuing with their foreclosure game and seizing property after property ravaging the socio-economic structure of America.

Two Representatives Grijalva and Kpatur sent a communication to the Treasury Secretary Timothy Geithener with signatures from 25 other Democrats of the House proposing the setting up of “a new federal entity” fashioned along the lines of Home Owner’s Loan Corporation or HOLC. The capital would come from the remainder of the TARP funds. In the communication it was stated that at the time of the Great Depression the government acquired successfully over million mortgages, refinanced and then serviced them prior to selling them. This operation of the government accounted for one out of every five non-farming dwellings in America. The letter read, “Such actions prevented untold foreclosures and even managed to return a small profit to the Treasury.”

In some places like Philadelphia compulsory mediation efforts have produced results and foreclosures have been kept on hold. Senator Jack Reed (Rhode Island/Democrat) has initiated a legislation that plans to generate a grant programme of $80 million to prop up these similar kinds of attempts.

A spokesperson of the Treasury said that the Federal Government is extremely worried about the moral implications of rewarding those who have taken loans which they should never have done. But the most alarming moral danger is to pamper the interests of the banking lobby.

It is irrelevant whether the house is being lost because of toxic sub-prime loans, unemployment or because the house has gone underwater with the worth of the property being less than the loan due amount. Each and every foreclosure brings down the value of neighbouring houses and negatively impacts on the revenue collection of the state. Loss of revenue leads to loss of jobs as well as services offered by the state. A terrible cycle sets in that is difficult to break.

HAMP is supposed to be of assistance to nearly 3 million or 4 million foreclosure victims but so far it has contracted only 230,000 permanent loan modifications. Last March there were 367,056 foreclosure postings – creating a record. It is a spike of 19% from the previous month of February.