Mortgage Lenders Eager To Avoid Foreclosures
Due to the traumatic circumstances the lenders are anxious that borrowers should try to contact them. This is the result of public and private collaboration to tackle the growing foreclosure crisis. Very recently the federal government acting in tandem with six mortgage giants launched Project Lifeline to be able to contact those borrowers who have fallen 90 days behind schedule. The lenders want the foreclosure process to pause. Experts say that this is nothing new – hitherto when such a situation arose the lenders have always tried to lengthen the rope.
Project Lifeline is an extension of the previously launched Hope Now Alliance that targeted defaulting and delinquent borrowers of sub-prime mortgages. Project Lifeline takes under its gambit all residential mortgages and not just sub-prime loans. The six giants involved in this operation are Countrywide, Wells Fargo, CitiMortgage, Chase Home Finance, Washington Mutual and Bank of America. Letters will be dispatched to individual borrowers who are 90 days lagging behind. An offer will be made for putting off foreclosure for another 30 days. The borrower is expected to contact within 10 days or receipt of the letter, to be desirous of keeping the house by avoiding foreclosure and to agree to take counseling regarding financial matters.
It is envisaged that in this way both sides will have few weeks in hand to work out a new agreement. There would be many options. The borrower could pay something extra each month and catch up with the arrears .The loan could be modified with the rates coming down to more affordable terms. It could, in an exceptional stand, mean debt forgiveness if the loan amount becomes more than the worth of the house.
Here again, experts comment that none of these measures are new. Lenders say that their biggest problem is that they cannot contact the delinquent borrowers before the foreclosure process kicks off. The foreclosure is a judicial process. The borrower is said to default when he or she is a month behind schedule. After that period increases to 90 days the borrower becomes delinquent and a foreclosure notice is sent. By it is notified that the property will be auctioned in the nearest court house and from the proceeds the lender will take back dues and taxes will be paid off. The problem is that that value of the house falls below the loan amount and thus there are no takers at these auctions.
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9 Responses
Have worked with several mortgage lender and investment companies who have initiated this process. On paper and in theory this sounds good, however in reality when the borrower calls the mortgage lender to discuss options. They are crushed with excessive fees and really unreasonable guidelines which make it virtually impossible for borrower to do anything. Prepayment penalties are left in place, thousands of legal fees raising loan to value as much as 5% leaving them stuck in the process. Seems like some of these companies would rather loose 150k to try and collect 10k. Doesn’t make much sense to me.
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