3 roadblocks to Obama’s mortgage rescue

Posted on May 16, 2009. Filed under: Foreclosure Defense, Housing, Loan Modification, Mortgage Audit | Tags: , , , , , , , |

NEW YORK (CNNMoney.com) — Loan servicers are overwhelmed by the flood of applications. Mortgage investors are angry about a congressional bill prohibiting them from suing servicers that modify loans. Foreclosures are rising as unemployment soars.

Nearly three months after President Obama first announced his $75 billion mortgage rescue effort, his administration is still refining the program in hopes of reaching its goal to save 9 million homeowners from foreclosure.

So far, more than 55,000 borrowers have been put into trial modifications, which become permanent if they keep up with payments for three months. Hundreds of thousands more have applied.

However, the initiative must still get over several hurdles before its chances for success can be determined.

Stressed servicers: The program’s guidelines were issued on March 4, but it took many servicers weeks to reprogram their systems and train their staffs. Many did not even start accepting applications until early- to mid-April, frustrating troubled borrowers forced to wait to find out if they qualify for lower rates.

Even now, housing counselors and borrowers report that servicers are still getting up to speed on the program, causing delays and confusion.

Take the case of Roberta Smith of Foster City, Calif. The 65-year-old has a mortgage where her minimum payments don’t cover all the interest that’s due. To stop her principal from ballooning, she has drained her retirement accounts. But she fears she soon may not be able to afford even the minimum payment.

Smith applied in late March for the modification program, but JPMorgan Chase (JPM, Fortune 500) told her nearly three weeks later that her package was not complete. She faxed the required documents and was assured by a telephone representative that the bank had everything it needed.

But this week she received a letter saying her request was being canceled because the application was incomplete.

Chase spokesman Tom Kelly said the letter was sent as a mistake and Smith’s application is still under review. He acknowledged that the bank, which began processing applications in early April, is still ramping up its modification efforts. Meanwhile, the bank is holding off on foreclosing on applicants.

“It’s an enormous task,” Kelly said. “We’re moving quickly, although not as quickly as an individual might wish.”

via 3 roadblocks to Obama’s mortgage rescue – May. 15, 2009.

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