Unless Lenders Reduce Payments Foreclosure Crisis Will Continue
Unless the lenders are persuaded to reduce payments foreclosure crisis will continue. But this seems to be more difficult a task than landing on Mars.
Karina Montenegro has been trying to make this impossible become possible. Her job entails contacting lenders to pursue the matter of loan modification. She dials one of the big giants, Washington Mutual, to check on the fate of an application submitted by a client whose income had gone down. She is kept on hold. Then sugar coated voices tell her to go from one department to another. Finally she is made to understand that the application has vanished – it being the third time since November 2008.
A spokesperson from the lending company says that he has no idea what has happened. He said, “I don’t know if there was a glitch in the system, whether it was transferred from one call center to the other.” There is a growing pile building up in the bank and there seems to be slim hope of this pile moving.
Montenegro and her co-workers endure this type of frustration everyday. It points to the difficulties that the programme of $75 billion, funded from the taxpayer’s kitty is running into. Initially the Obama administration had expressed hope that it would benefit 4 million harassed homeowners.
As per the plan the federal government holds out the carrot of $1,000 for each loan modified to the lenders. Plus they will get $1,000 for a year continuing up to the third year.
The focus of the remedial measure is not just to help the borrower but to pull up the entire economy. If the latter effort fails foreclosures will continue to dominate and property prices will keep on tumbling causing new losses to the already beleaguered financial system. It will tear up the old wounds causing fresh bleeding.
It has been four months since the Treasury announced the measure. Since then millions have become delinquent and are facing foreclosure. Michael S. Barr the Assistant Secretary of Financial Institutions said that the mortgage servicing companies are creating hurdles. He expressed for the first time his displeasure towards the lending lobby. He said, “They need to do a much better job on the basic management and operational side of their firms. What we’ve been pushing the servicers to do is improve their infrastructure to make sure their call centers are doing a better job. The level of training is not there yet.”
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