Despite Modifications Many Are Again Facing Foreclosure

March 17th, 2009 | Tags: Foreclosure

It is ironical that despite modifications many are again facing foreclosures. Luzetta Reeves is one of the victims. She requested her small lender to reduce her monthly payments. It agreed and cut it down by 11% and thus she could continue to stay in the house that was her home despite her modest income.

But the story is different of Jeffrey Mitchell in Miami. His family income fell just at the time when property taxes began to increase together with insurance premiums. This made it impossible for him to continue with his monthly mortgage payments. He asked for and got a lower interest rate. But the addition of sundry fees and penalties has caused his monthly amount to be paid the same as of yore. So he is again facing foreclosure.

The government trying to ease problems of foreclosure victims would do well to mull over these two instances of good intentions having gone awry. Here two lenders have been referred to – one big and the other small. The experiences of disabled 54-year-old Reeves and 42-year-old Mitchell (union representative) are fairly common. The 14 largest banks of the nation reported that over half the loans that they had modified the previous year had become delinquent within 6 months of having done so. This is according to the Federal Bank Regulator, the Comptroller of Currency. But the smaller mortgage companies have reported that less than a quarter of their loans have relapsed into delinquency.

Tom Miller the Attorney General of Iowa said, “It’s becoming more and more clear to us that if you do real modifications the default rate is significantly lower.” Miller has organized a group of officials from the state to push the industry to try modifying a bigger number of loans.

The foreclosure crisis has beset the country for two years. Many borrowers continue to have trouble trying to contact their mortgage lenders so as to request them for loan alterations. The lenders have been flooded with jumbo losses but some adhere to the petty thinking that by continuing with foreclosure they will gain by levying extra fees. They would not then have to wait to see if the homeowner manages to continue with the payments.

In countering this charge the banks claim that they follow the course that will cut down their losses to the minimum. They also complained that often it is hard to reach delinquent borrowers because many of them avoid their creditors and hide.