The federal government created programs to help homeowners facing foreclosure. Under the Home Affordable Modification Program (HAMP), as many as four million homeowners were speculated to be eligible for a loan modification. However, as of May 2012, only one million homeowners had received a loan modification under the program. When asked why the programs weren't as successful as estimated, the Treasury Department blamed the banks for not implementing them.
The initial programs did not require the banks to offer loan modifications and most still don't. The programs simply set forth guidelines for loan modifications. Now, the government, specifically the Treasury Department, credits the ineptness by the mortgage companies for the lack of success and real progress toward minimizing foreclosures.
While the banks have made mistakes, for the most part, they are experienced in servicing mortgages and providing refinancing and mortgage modifications. However, not in the high volume that banks and servicers have faced during the last several years. Some of the largest banks already had their own foreclosure prevention programs in place. Prior to its demise, Countrywide claimed that their "special" Home Retention Unit was one that strived to avoid foreclosures through several options. Many homeowners that lost their homes would beg to differ.
Over time, some banks have added more tools to help homeowners become current on their mortgage payments, including new loan modification programs, payment plans, forbearance or walk away from their homes with higher short sale approvals, deeds in lieu of foreclosure and even rent back options. Recently, some new foreclosure prevention measures were implemented because of a $25 billion settlement between major lenders and states wherein the banks agreed to provide homeowners with options to avoid foreclosure and pay for their part in faulty foreclosures, such as foreclosing while a home was under a trial modification period and the practice of robo-signing. To implement the measures called for in the agreement and to be able to address the increase in loan modification and foreclosure prevention requests, banks have had to ramp up and train employees to keep up with the high demand.
In response to the Treasury Department's accusation that the banks were responsible for the lack of the government's foreclosure program's success, the banks admit that mistakes are sometimes made. However, in their defense, they also state that due to unemployment and lack of income, some homeowners cannot make their payments, even if their mortgage has been modified. In addition, they thrust blame back to the government, stating that the programs it created were difficult to implement, constantly changing and poorly conceived.
Regardless of the blame game, it is homeowners who have paid the highest price in trying to save their homes. They face ongoing frustration in dealing with servicers while they implement their programs, time delays, lost paperwork, and stress. Add to that a lack of accountability on behalf of the banks and faulty practices like robo-signing, and homeowners are vulnerable to mistakes and wrongful practices. In order to turn around this trend, banks will have to commit themselves to foreclosure prevention and ensure that they have the policies, procedures, and staff in place to make sure that homeowners are treated timely and given accurate information and real options to save their homes. In other words, there is more than the government and the banks involved in foreclosure prevention. The persons who are affected the most are the homeowners, followed by the domino effect foreclosures cause to neighborhoods and communities. From neighborhood blight to the attraction of crime, foreclosed homes are causing home values in the surrounding area to decline and lost revenues to local governments.
Yet, in the fight to save your home from foreclosure, a loan modification is the primary tool available to homeowners. While you're applying and dealing with the bank, be prepared. Be your own best advocate and be assertive when overcoming issues and escalating your request in the fight to save your home.
Anna Cuevas, ex-bank executive turned homeowner advocate known as "America's Loan Modification Guru," has empowered and guided thousands of Americans in keeping their homes from foreclosure through loan modification self-advocacy. A popular blogger (askaloanmodguru.com), Cuevas has been called a "superhero of the loan modification industry" and has been nominated for CNN's Heroes. She is the #1 bestselling author of SAVE YOUR HOME Without Losing Your Mind or Money.