Wednesday, February 18, 2009

The Government, the Banks, Lobbyists and Mortgage Modification

Well, it looks like the U.S. Government is finally putting some muscle behind mortgage modification. For factual details about the plan go to the new website

I hope that this program will fare better than Hope for Homeowners, a refinancing programs unveiled this fall with much fanfare. According to Business Week in "How Banks are Worsening the Foreclosure Crisis" by Brian Grow, Keith Epstein and Robert Berner, only 25 loans have been refinanced through Hope for Homeowners. You may ask - Why? Well, the Business Week article explains, "One reason foreclosures are so rampant is that banks and their advocates in Washington have delayed, diluted, and obstructed attempts to address the problem. Industry lobbyists are still at it today, working overtime to whittle down legislation backed by President Obama that would give bankruptcy courts the authority to shrink mortgage debt. Lobbyists say they will fight to restrict the types of loans the bankruptcy proposal covers and new powers granted to judges." Essentially, it sounds like the banks via their lobbyists have successfully watered down Congress's efforts to help stem the tide of foreclosures. The final affect is that the previous proposals have become useless.

As a bankruptcy lawyer and real estate broker in California, I see the trouble responsible, hard-working people are in with their mortgages on properties that they can no longer sell. Unfortunately, many of these people have pinned their hopes on modifying their mortgages to no avail. In fact mortgage modification (and short sales for that matter) had been gaining momentum until the banks received all of the stimulus money with very few strings attached. This fall, it seemed like the banks lost any motivation for working with borrowers.

I am hopeful that our government has learned from its mistakes and that we can do what is best for the American people rather than kowtowing to some handsomely paid lobbyists!

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