For those of you who are have fallen behind on your residential or commercial mortgages, many articles, publications and reports have been aired to establish areas for solutions to these troubled loans. Congress created the Troubled Asset Relief Program (TARP) to preserve homeownership and protect home values. In March, 2009, the Treasury Department set up certain guidelines and procedures through its Home Affordable Modification Program in order to achieve these goals.
Since then, numerous revisions, changes and amendments have been designed as a detailed description of these actions, and broadened the horizons of those persons targeted for help under these plans. Despite our government’s gargantuan efforts, the statistics leave many open mouthed, shocked by the NON-compliance of servicers and investors.
Loan Modifications are Not Working
Conversion rates of those who have qualified for temporary loan modifications are less than 1/3 of those who have participated, and the number of trial modifications has been cut in half. Those left behind, in massive debt but overwhelmingly determined to keep their homes, struggle against the prevailing practice of foreclosure. The Treasury’s stated intentions of reducing the principal on home loans in default has not been implemented, thus pushing the pedal for renewed defaults. Principal write downs would very likely raise the bar of successful modifications and reflect the enormous property value decline of the past several years, with years yet unseen for re-capture of this economic failing.
How It Happened
So many homeowners, realistically, live in their homes but have little, if any, equity or monetary value. They were encouraged to refinance or purchase their homes on a quicksand of transparent lending practices and origination policies. The result was that the wealthy got richer and Wall Street prospered beyond our comprehension, as rating agencies, insurers and investors bought, sold and traded your mortgage loans, bundling and investing. As a result, our great state of New York now ranks 14th in homeownership with little or no equity. Thousands of our neighbors, friends and colleagues are left behind in these seas of the forgotten. There is little concern for the havoc these lending practices caused on the properties that were mortgaged, the treasured mementos they held and the surrounding communities they supported.
Taking Action
As we move forward with our clients, many of whom are in the situations described above, they are now coming out of hibernation and stagnancy and moving into massive waves of action and energy to pressure their lenders and servicers into foreclosure modifications and solutions. Over 100 mortgage companies and servicers have voluntarily agreed to participate and must account for their actions in court-mandated foreclosure settlement conferences. Nationwide foreclosure actions have seen an 8% increase from the same period last year, and distressed homeowners find themselves stuck with invisible lender representatives who have no accountability, phone numbers or email addresses.
Nevertheless, and amidst these seas of the forgotten, our clients find a ray of hope. What our clients see are emerging patterns of movement and success. Short sales may proliferate in our marketplace, with little consideration given to the forgotten former owners and their families, children and relatives. But for those who have chosen to remain in their homes, there is little doubt that new regulations and programs, such as principal reduction for eligible borrowers and temporary forbearance of the unemployed, along with other solutions, will materialize if they remain viable candidates to succeed. The HAMP program and guidelines are effective tools to combat foreclosure actions, and our Courts provide platforms to implement our laws and give traction to those who choose to avoid foreclosure and keep home their own.
