Abysmal Record on Modifications Prompts Additional Attention

29 Nov Abysmal Record on Modifications Prompts Additional Attention

CNN reports that the Treasury Department is ramping up efforts to coerce banks into modifying more mortgages. The reason is, of course, that the number of mortgages that have been modified under the HAMP (or any other) program have been insignificant:

For example, fewer than 5% of the trial adjustments on loans owned or guaranteed by Freddie Mac were converted to permanent modifications as of Sept. 30, according to the mortgage finance giant.

Looking more broadly, the figures are even lower. As of Sept. 1, only 1.26% of all trial adjustments were made permanent after three months, reported the Congressional Oversight Panel, which monitors the government’s use of bailout funds.

Meanwhile, more and more people are falling into foreclosure. The combined percentage of loans in foreclosure or at least one payment past due was 14.4% in the third-quarter, according to the Mortgage Bankers Association. That’s the highest the group has ever recorded.

Lenders say it’s the fault of homeowners–that they don’t provide documentation, or don’t have jobs, or don’t hold their mouths just right when they are licking the stamp to mail their trial payments. (Pardon me, my cynicism may be showing.) Borrowers report (to CNN, and on a smaller scale, to me) that they send the same documents over and over, but the lenders “lose” them.

While the Obama administration and the Treasury Department struggle to put enough pressure on banks and mortgage lenders to take the steps needed to prevent a total meltdown of our financial system AGAIN, I would just like to quietly remind them, and Congress, that giving bankruptcy judges the power to do just that might be a very good idea. Just a hint….

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