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19 Jun 10 Are California Loan Modification Plans Working for Lenders?

Thousands of struggling California homeowners have been screaming for years to get additional mortgage relief. Did you know that banks holding mortgage notes foreclosed on nearly 200,000 homes in California last year? Worse yet, it looks like the California loan modification plans are not working because 2010 toll looks like it will increase last year’s totals for loan defaults. California state lawmakers continue to try and plead with the lending banks to do extend more loan workouts that help both sides. Yet homeowner advocates say a serious problem remains. SB 1275 would prevent mortgage lenders and banks from foreclosing on borrowers who are seeking to modify their loans.

According to the LA Times, Many mortgage lenders are “overwhelmed and disorganized but they continue to foreclose on borrowers who are actually in the process of finalizing a home loan modification that would ensure more affordable monthly payments. At a time when the housing market is flooded with foreclosed homes, this doesn’t help anyone. The federal government rolled their attempt to stem the foreclosure crisis with the Home Affordable Modification Program that was created to stop lenders from foreclosing while a modification is pending, but other initiatives don’t.

California Senators Mark Leno and Darrell Steinberg are proposing to extend the same protection to all Californians seeking loan modifications. The California loan modification bill (SB 1275) would stop a home loan lender or mortgage service company from initiating the foreclosure process until after a mortgage loan modification application was denied. It’s a modest change that wouldn’t require mortgage lenders to change the terms of any loan modification program. Nor would it require lenders to do more to reach borrowers before foreclosing than state law already requires or to slow down foreclosures on borrowers who are beyond help. The law would require mortgage lenders to notify borrowers who get behind on their home loan payments about the foreclosure process and the availability of home refinancing or loan modification options, if any. And if borrowers applied unsuccessfully for a loan workout, the mortgage company would have to send them a letter explaining why they were denied and how they can appeal the decision before filing a notice that the mortgage was in default. The purpose of the bill was not just another attempt to help homeowners avoid making their mortgage payments; but it was created to help protect lenders from themselves. A recent report revealed that Housing counselors say the No. 1 problem is poor communication between mortgage companies and distressed borrowers.

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    [...] after a mortgage loan modification application was denied. Read the original article online > Are California Loan Modification Plans Working for Lenders? Filed in Foreclosure Prevention News, Home Affordable Modification Program, Loan Modification [...]



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