The foreclosure crisis in USA ultimately led to global instability. Miguel D’Escoto the president of U.N. General Assembly said that the approval has been given to a proposal that can be considered to be the first step of many that will try to put the world along a new course leading to solidarity and stability that could be sustained.
A central forum has been set up for discussions on international financial and economic subjects. He was speaking after the UN Conference on World Financial and Economic Crisis and its Impact on Development came to a close in New York. He said that this itself was an important achievement.
The assembly has been told to follow up the matter with the help of a working group to deal with mitigation of crisis, reframing the financial and economic system, external debts and world trade. It has been admitted that the present crisis should not delay the world response to changes in climate and degradation of the environment. Initiatives on ‘green economy’ have to be taken.
D’Escoto reiterated, “We are happy but not content, or rather, not completely satisfied. We must all join forces to confront these crises. The proposals we have adopted today point in this direction. But much remains to be done.” He pointed out that there were heavy clouds looming in the horizon relating to food, water and fuel.
The conference lasted for three days and there were many rounds of discussions covering various issues regarding the part to be played by U.N. in responding to these problems and how to solve these. It was noted that although the developed countries have not been spared they have the means at hand to tackle it. But this is not so the case with other parts of the world. Helen Clark the administrator said, “Some expect a slow recovery towards the end of this year or in the first half of next year. The turn-around for developing countries, however, may well take longer. Many impacts of the crisis in developing countries, such as slowing growth rates, rising unemployment, and declining budgets are only now beginning to unfold.” The main concern is that progress rate will be slowed and anti-poverty targets would not be reached. She added, “We must do all in our power to stop this happening.”
Representatives from 150 countries attended this high level conference focusing on the international economic gloom and its impact on the developing nations.
Finally progress has been noted in the new foreclosure prevention plans. HUD officials noted that lenders had extended loan modification offers to 40,000 borrowers who had been battling high mortgage instalments till the second week of June 2009. It is three times the number of average mortgage settlements that servicers had hitherto tackled.
Shawn Donovan the head of HUD said, “Foreclosures were becoming a self-reinforcing problem for the housing market. Already we are seeing signs that the housing market is better off than when President Obama took office.” He was speaking at a conference organized by National Association of Real Estate.
The financial crisis has been beset by many problems but of all these, the toughest to tackle has been the issue of increasing number of foreclosures that defied all palliative measures. The Hope for Homeowners plan that had been launched with great hype by the Bush administration failed to take off. Only 51 borrowers could change to cheaper costing loans. Another scheme Hope Now Alliance that had leaned heavily on the voluntary efforts of the lenders could reach out to 4 million householders. But it has been calculated that less than a quarter of these finally did get affordable loans. The irony was that many of these borrowers saw their monthly payments increase after negotiation! The lenders shrewdly tagged on unpaid dues to the principal amount instead of forgiving it.
In March 2009 the Obama government set off the programme known as Making Home Affordable. This plan had a totally different approach with incentives being offered to the lenders, servicers as well as the borrowers to modify or refinance the loans. The carrots offered depended on the success of their endeavours. The longer a borrower remained current in payments the servicer would get more. The government also promised $10 billion to compensate for the losses that banks as well as the investors suffered because of these workouts.
Initially the plan was a slow starter and it seemed that its fate would be no different from that of the others. But during the past couple of weeks the efforts of the Obama government seems to drawing to it more lenders who are willing to come to new terms.
Critics however say that considering the enormity of the problem the plan does not even scratch the surface. Much more is required. Right now there are 40,000 modifications each week. Even if this pace is maintained the plan will reach only 2 million in 2010. But the country is plagued with 6 million foreclosure victims
Foreclosure numbers continue to dominate and win as lenders fail to workout loans amicably. The Obama team introduced a $75 billion plan to bring down the number of foreclosures but progress has been hampered by backlogs and delays in response from lenders. The borrowers are complaining about phone calls being unanswered and wrong details being given by the lenders. Others say that for unknown reasons the lenders are not giving help.
When the plan was envisaged in March 2009 it was hoped that 4 million would benefit from it with the banks modifying the loans and bringing down the monthly payments. Since the plan took off there have come in 190,000 offers for modifications of mortgages according to the Treasury. But during that same period the lenders have initiated foreclosure proceedings against over 1 million defaulters as per the findings of RealtyTrac. 20% of these have either been foreclosed upon or repossessed.
Economist Joel Naroff said, “Some lenders may not be turning (homeowners) down right away because it might be politically easier to push them off and delay. No one will admit they’re doing this.”
In June Senator Jack Reed (Democrat) together with 14 other colleagues sent a note to HUD secretary, Shaun Donovan asking for new measures to be taken to make the lenders respond to the appeals quicker and faster. The letter read, “Of particular concern are homeowners who have been instructed by HUD-approved counselors to contact their (loan) servicers only to be rebuffed or, worse, never even reach their servicer.”
Two of the unfortunate borrowers trying to get modification are Robin and Craig Doyle residing in Woodland Hills in California. They have been trying for a workout since February last. Robin is a freelance writer. She was initially asked to post a letter describing her hardship together with proof of her income and tax papers. She got together a file running into 200 pages. After one month she was told to rearrange the papers as these documents were not current anymore but outdated. On another occasion she was told that her file had by mistake been altogether closed. In yet another instance she was refused help on the ground that her papers had not included fees given to the house association. Robin bemoaned, “I’ve had to resend it four times. It’s making me sick. It’s been five months. I’ve spent hours and hours on this and sleepless nights. It’s foremost on my mind. I look at my beautiful home and wonder if I’ll have it next month.”
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