I have been following the Center for Responsible Lending in the news lately and what I have seen so far has impressed me. They truly seem to be fighting for homeowners and in particular lobbying congress for loan modifications. Everyone who has been following this forum and my blog at LoanWorkout.org, know that my mission is to promote massive loan modifications to save homeowners and our economy.
On August 22, 2007, Paul Leonard, California Office Director for the Center for Responsible Lending testified before the California Senate Banking Committee and proposed three strategies for the state to implement to help California's foreclosure crisis: emergency funding support for foreclosure prevention counseling and legal services; creation of a monitoring system for lender loan modifications; and a targeted refinance product for borrowers who would not qualify for refinance or modifications.
You can read all the strategies at the California Progress Report Website.
I'm just going to highlight some of the items that I thought were very important for homeowners who are trying to stop foreclosure.
I agree 100% that homeowners need a "trusted" advisor to help them through the loan modification process and that non-profits should be delegated to handle the huge task at hand. Without proper funding for these non-profits, then it will not work. Theye need money to support them so they can hire the necessary man power that this huge trillion dollar task will need to succeed.Housing counseling agencies and legal service providers can be critical assets for borrowers, but their limited resources are swamped attempting to assist needy borrowers. These agencies provide critical support for borrowers in navigating the complex process of negotiating with servicers through the loss mitigation process. Having a knowledgeable “trusted adviser” who has no financial stake in the outcome a borrower’s negotiation can balance the knowledge gap between a professional servicer and less-knowledgeable borrowers.
Moreover, many borrowers may be victims of illegal practices and need the services of a lawyer. There are extremely few lawyers working in the state who can afford to represent individual clients with mortgage cases. The cases are often complex and time-consuming and frequently damages may not include lawyers fees.
California only receives approximately $3 million in federal counseling assistance funding and most of these resources are directed at activities to assist first-time homebuyers prepare for purchasing their homes.
California should appropriate an emergency supplement of $5-$10 million, enacted and disbursed as soon as possible to provide borrowers with critical assistance necessary to save their homes.
This is the only true alternative to fix these loans and help stop foreclosures.2.) Making Loan Modifications Work: Loan modifications offer the most promising alternative for both borrowers, taxpayers and the healthy functioning of mortgage markets in the future.
Hell yeah, these lenders need to be monitored and held accountable during the loan modification process. There also needs to be standards and policies in place so we are all on the same page in regards to who, what, where and when. It like the wild, wild west all over again. Borrowers went from getting treated like kings when they went to these lenders for the loan they are in now. And now when they need help it's like they went to the doctor's office from hell. You know the ones where they make you wait and wait forever and the staff is rude. That's the treatment these same people are getting now that they need help It has to STOP!Need for Accountability and Standardization and in Modifications
In preparation for the dramatic increases in loan resets, servicers are now expanding their loss mitigation efforts, adding staff and employing new efforts to contact borrowers early to prepare for the reset. The American Securitization Forum, an industry group has produced a Statement of Principles, Recommendations and Guidelines on Modifications to its members. (American Securitization Forum, Statement of Principles, Recommendations and Guidelines on Modifications, June 2007.
While lenders profess a desire to avoid foreclosures, there are few mechanisms in place to track the outcomes for borrowers who participate in loss mitigation efforts. No data is regularly reported by lenders as to how many borrowers who participate in loss mitigation efforts avoid foreclosures, nor on the terms of the loan modifications they receive. The state could quickly establish a reporting and monitoring system for loans that are modified. This would greatly increase the accountability of servicers’ loan modification efforts and allow the public and policymakers to track success and gain a greater understanding of which loss mitigation practices and servicers are most effective in achieving long-term affordability outcomes for borrowers.
State policymakers should also work with servicers to develop transparency and objective standards for loan modifications. Under current practice, each loan modification is developed on a case-by-case basis, subject to the financial circumstances of individual borrowers. There is little transparency for borrowers to know the best terms for which they could qualify and no guarantees that similarly situated borrowers will be treated equally. Having more streamlined and objective standards in place should simplify and streamline the modification process, and allow more consistent and successful results for borrowers and lenders. These standards would also avoid potential fair housing issues.
In sum, the legislature or Governor should immediately establish a data and monitoring system to track foreclosures and the outcomes of loan modifications for at-risk borrowers.