Statement by Michael Calhoun, President, Center for Responsible Lending
The federal report card on the mortgage industry's voluntary effort to stop foreclosures shows a growing number of families have received a loan modification. That's good news, but hardly enough. Given the magnitude of serious delinquencies and projected foreclosures starts in the months ahead, these gains fall far short of what's needed to stem the foreclosure epidemic and restore the economy.
The report from the Treasury Department shows that, of the seriously delinquent borrowers eligible for help, only 19 percent have been offered a trial modification and only 12 percent are actually in a trial modification. These meager results come as homeowners' frustration mounts. Distressed borrowers daily face servicers who don't return calls or who ask for the same documents over and over, only to lose them, or who deny modification requests without explanation.
Given these hurdles, we welcome the Treasury Department's announcement that, starting Oct. 1, it will require companies to tell homeowners and the government why a request for a loan modification has been denied. These explanations should include the information used to reach a decision and how borrowers can correct any errors.
While more information will be helpful, the foreclosure epidemic won't end until homeowners have more options to recover financially and keep paying their mortgage. Last spring the Senate rejected a proposal to allow homeowners to seek loan modifications through our existing court system. This measure would have provided a strong incentive for private companies to act quickly and responsibly. This week House Financial Services Committee Chairman Barney Frank proposed that Congress revisit this option. Our hope is that both the House and the Senate will heed that call and take swift, bipartisan action to allow court-supervised modifications. It's the only remedy that would significantly boost foreclosure prevention, and it would do so without costing the Treasury a dime.
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