Legislators Push for Foreclosure Prevention Czar
Congressman Barney Frank and Representative Maxine Waters sent a letter to President Bush, urging him to place FDIC Chair Sheila Bair in charge of foreclosure prevention on mortgages acquired through the recently passed $700 billion legislation. You know, the one where the federal government was going to buy distressed mortgages? Never mind that they’ve already spent half of the money injecting capital into banks and NOT buying mortgages.
You may recall that Frank, Waters, and others were telling lenders to halt foreclosure actions until the federal government could get its “Hope for Homeowners” program up and running. As I predicted, that alleged foreclosure prevention program is still nowhere near operational. It’s not that I’m so prescient, it’s just that the federal government is so predictable.
When you apply for a job, you want a recommendation letter from someone who’s reputable, right?
Well, let’s take a look at Mr. Frank and Ms. Waters.
These are the same people who refused to impose stricter oversight on Fannie Mae and Freddie Mac.
These are the same people who wanted to reinstate down payment assistance programs, even while the FHA Commissioner showed that they increase foreclosure.
Ms. Waters also recently admitted that she didn’t know the difference between a mortgage servicer and a mortgage investor. This despite the fact that she’s on the House Committee on Financial Services. No big deal, they just OVERSEE THE MORTGAGE COMPANIES, THAT’S ALL.
So let’s take a look at their “golden girl.” Bair unveiled her plan for IndyMac loan modification efforts way back in, oh… August?!!? I’m not even aware of an early report on the number of loan modifications successfully completed. Sure, they’ve mailed out 7,000 packages to homeowners, but how many have turned into loan modifications? Is this ratio more or less than the industry average for such experiments?
One major servicer recently sent out a blitz of loan modification packages, and they were jumping for joy at a 30% response rate.
Many industry experts were predicting that this “foreclosure prevention progra”m would prove no more effective than what’s currently being done by mortgage servicers, because essentially, there’s nothing different, or innovative, about it.
Furthermore, just because a loan modification is approved doesn’t mean that it’s a truly successful workout. Half of all loan modifications eventually end up back in foreclosure.
A successful effort to prevent foreclosure is one that stands the test of time. Not only do we not know how well Ms. Bair’s program is working on the front end, we certainly have no idea if these mods are going to be successful long-term.
So I think it’s a little early to crown Ms. Bair the “Foreclosure Prevention” Czar.
I certainly don’t have bear any ill will towards Ms. Bair, I believe she truly wants to help homeowners keep their homes. But at the end of the day, it’s not the efforts of the loan servicer that will ensure that a homeowner ultimately “stays home.”
And, as I mentioned even IF the federal government does begin buying distressed mortgages and tries to institute an aggressive foreclosure prevention program, they still have to manage the portfolio responsibly. In other words, they still have to manage the loans with an eye towards profitability.
The real work of establishing a game plan, of educating homeowners on all of the steps they can take to ensure that they don’t relapse, and following up to make sure that they actually TAKE those steps, is far outside the scope of the mortgage servicing industry.
If you’re smart enough to realize that a loan modification is just one piece of the puzzle, and you’re seeking a foreclosure prevention process with a 92% success rate of keeping homeowners in their homes long-term, get in touch with us at 888 327 5095.
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