We are now in the fifth year of a housing crisis in which more than 3 million Americans have lost their homes to foreclosure, with millions more still at risk.
Every initiative to stem the tide of misery has fallen short in the face of continued economic gloom.
Over the next few weeks, several initiatives aimed at ... [Read More]
We are now in the fifth year of a housing crisis in which more than 3 million Americans have lost their homes to foreclosure, with millions more still at risk.
Every initiative to stem the tide of misery has fallen short in the face of continued economic gloom.
Over the next few weeks, several initiatives aimed at reforming the foreclosure process, holding mortgage lenders and services accountable for their past abuses, and creating more effective mortgage workouts are coming to a head.
Typically, banks and other lenders retained almost no financial interest in the mortgages they originated, other than the duty to service them — collect payments and pursue delinquent borrowers, say — for which they received a fee.
Several drawbacks to that system emerged when the housing economy crashed. Because the loans weren’t going to stay on their books, the lenders hadn’t been too careful about whom they lent to and on what terms.
Perhaps the biggest problem is that although the servicers, which include huge banks such as Bank of America and Wells Fargo, are burdened with the responsibility to renegotiate mortgages to keep borrowers out of foreclosure, their authority to do so on behalf of investors is murky.
As a result, though the investor, the borrower and the economy in general benefit if a home is kept out of foreclosure, even if that means its owner makes lower payments than were required by the original mortgage, the servicing banks are leery of renegotiating too aggressively.
The most closely followed remedial effort involves the 50 state attorneys general under the leadership of Iowa Atty. Gen. Tom Miller.
Last March, the group produced propsal for foreclosure reforms that drew fire from some consumer advocates for being too lenient — its provisions include mandates that banks comply with state law in dealing with borrowers, as if that’s a novel concept — and from business interests for putting too much pressure on banks to reduce principal balances for homeowners having trouble keeping up payments on homes with values that have fallen below the mortgage balance.
Information obtained by the Calif. Asso of Realtors & the L.A. Times. For the whole story: http://articles.latimes.com/2011/aug/14/business/la-fi-hiltzik-20110814
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