The US Treasury Department just might look like a knight on a white horse to some homeowners facing foreclosure and unable to get cooperation from their mortgage company.
Despite a federally backed loan program meant to create permanent loan modifications, banks have been slow to work with consumers. That may change as the US government threatens fines to be assessed against banks unless they speed up their mortgage modification programs meant to keep homeowners in their houses.
The loan modification programs are meant to permanently lower mortgage payments so they are more affordable for homeowners trapped by a struggling economy. It is estimated that 375,000 homeowners are eligible for the government program by the end of the year. Given the rate of foreclosures this does not seem like many people overall. To date there have been 650,000 temporary mortgage modifications that fall under the Home Affordable Modification Program.
Unfortunately the banks and mortgage companies have been quite slow about processing the loan modifications. In many cases the mortgage holders claim that frequent sales of mortgage to one company or another has made it difficult to track a consumer’s mortgage history or paperwork is difficult to locate. In addition, consumers are saying the mortgage companies often lose paperwork turning the process into a nightmare process.
Some industry officials claim the Home Affordable Modification Program is actually hampering efforts to restructure mortgages. But that belief does not sit well with consumers or the US Treasure Department. Temporary mortgage modifications were supposed to be converted to permanent modifications wherever possible. Instead consumers are finding themselves with temporary modifications that seem to be in a state of limbo. Out of the 650,000 eligible temporary mortgage modifications there have been only 1,711 permanent modifications.
Banks are obviously dragging out the process of converting mortgages from temporary to permanent. The Treasury Department is going to set performance standards for banks. Any bank that fails to meet the standards will have to supply a reasonable explanation or face fines or sanctions. The details of such a plan have not been developed or issued yet.
The US government and consumers are getting increasingly impatient with the banks. The banks are largely the cause of the recession due to mortgage backed securities. When faced with collapse they received federal bailout funds meant to keep the banks solvent until the crisis passed. But now it’s consumers who need help and the banks are not cooperating. In the meantime, foreclosures continue to rise.
The Treasury department is sending teams of experts into mortgage offices to collect information as to why so few permanent loan modifications have been completed. The mortgage servicers will have to report to the Treasury Department on a regular basis concerning the status of each loan modification. In addition, consumers will find detailed information on a Treasury developed website concerning the process for applying for a permanent loan modification.
Tags: US Treasury Department, Subprime mortgage crisis, Mortgage modification, Mortgage, Banking, personal finance
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What the US Treasury Department is doing is very helpful to people on their mortgage. Good job.