Jan
20
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Loan Modification – President Bush On Loan Modifications
One significant action doesn’t need congressional approval and can make a big difference. You can’t expect miracles unless you have a real plan. If you have wide-scale loan modification programs by lenders that were effective mortgage holders can stop the freefall and rebuild this country to a sustainable economy.
Some are frustrated that Congress cannot agree on what to do. Do you just bail everyone out and suffer the consequence? The FDIC has their hands full with INDYMAC and WAMU as well as several other small defunct banks. The unfortunate thing is they currently do not have the resources necessary to stop the record pace of foreclosures. The creators of these risky investment products wait for Washington to do something fast. The problem is Washington just can’t move fast enough, and whatever they come up with will be too little too late to help home owners facing foreclosure. Wall Street firms and lenders, however, should ask themselves whether they have done enough to get their own act together; they don’t need any more delays. They need to take action to help themselves, homeowners, and our economy.
 Last year, the Legislature enacted a 90-day “right-to-cure” provision giving homeowners more time to seek loan workouts before foreclosure. Our office has worked closely with lenders and mortgage services to use that time to offer sensible loan modifications to distressed homeowners. Because a foreclosure costs the lender an average of $50,000 in fees not to mention devalued real estate, preventing foreclosure is in everyone’s best interests. While some lenders are reaching out to borrowers struggling with their mortgage most are scurrying to stay afloat. Countrywide Home loans now B of A, WAMU now JP Morgan Chase, CITI now backing off the troubled Wachovia to allow Wells Fargo to step in, it appears as if we are left with the four major banks in the country. Not to mention nearly all our failed brokerage houses now we have Goldman Sachs taking out hard money loans. What are the next steps, food and gas lines? Â
Some banks may have modified some terms in some loans, but most lenders have failed to offer loan modifications in meaningful numbers. Most are simply unaffordable forbearance agreements that can’t perform at all. In the last three months, lenders issued 4,721 new foreclosure notices in Massachusetts alone. During that time, only 144 loan modifications were filed in the Registry of Deeds. We have reviewed those 144 modified mortgages and found that virtually none reduced the monthly payment owed by the homeowner. The latest report of the Multi-State Foreclosure Prevention Group for the period January through May 2008 confirms this dismal record. California and Florida’s numbers are even worse, says Attorney Steven C. Feldman with the Feldman Law Center who provides loan modification services for troubled borrowers. Feldman goes on to say “We have see so many files come our way from clients failed in attempts to modify their home loans with loan modification companies or directly with their lender, the saddest part of it all is we get the loan modified to agreeable and affordable terms in as little as 3 weeks. If the lenders had the resources available to reach out and modify mortgages prior to default our country would be in much better shape. At the end of the day it’s a numbers game; just do the math, 700 Billion is lot money!
Many families struggling to hold onto their homes and savings are not looking for charity or a bailout, and that is not what loan modifications are about. If they had true hardships that are one thing but bad investments from speculators is another. Real loan modification programs by lenders, servicers, and investors are necessary to stop foreclosures, stabilize cash-flow on the mortgages owned by failing financial instruments, and help put a floor under the downward asset spiral that exacerbates the crisis in the credit markets.
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The Bush administration’s original plan of simply throwing $700 billion into the hole without putting a floor on the bottom would have wasted money and would not have worked. Representative Barney Frank and others in Congress have improved that proposal, and should be applauded for incorporating homeowners’ interests. The proposal rejected by the US House of Representatives this week, however, did not do enough to require the scope of loan modifications necessary, and misplaced the cost of modifications on the taxpayers, rather than on the creators of the unsustainable loans.
An effective rescue package should require, as a condition of participation that current mortgage holders and servicers rewrite delinquent loans to avoid foreclosure when the borrower’s current ability to pay will provide an income stream preferable to expected losses at foreclosure. Transferring of toxic mortgage products from the books of financial firms to taxpayers’ books without systemic loan modifications first isn’t the solution. Feldman Law Center as others are working with home owners facing default or foreclosure providing loan modification services but these struggling home owners are also being victimized by ex mortgage brokers and telemarketing scammers trying to squeeze the last bit of juice from these poor home owners. The bottom line is if you can’t get the help you need from your lender then hire an attorney. The Feldman Law Center is a Law Office that specializes in loan modification services for struggling home owners. You can find them at www.feldmanlawcenter.com
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