Despite promises of relief from the U.S. Department of the Treasury, policymakers, and lenders, our homes are still being foreclosed at record levels. When it comes down to it, no one is forcing financial institutions to modify loans, and they certainly aren't volunteering. Pledges of assistance have waned and the harsh truth is that Black and Hispanic middle-class households are losing ground.
Families who have tangled with the dicey loan-modification process know that the lenders are not budging. Many borrowers behind on their mortgage payment are keeping up their end of the deal. They call their servicer and submit their paperwork, sometimes seeking the help of nonprofit foreclosure prevention groups, only to have their request stalled in vague protocol and bottlenecks. Those that obtain a trial modification while running the foreclosure prevention gauntlet consider themselves lucky.
Homeowners seek true relief and wish for long-term sustainability. Temporary escapes from the foreclosure crisis do not solve the problem for borrowers or our national economy. According to the Making Home Affordable (MHA) October 2009 Servicer Performance Report, only 650,000 trial modifications have been issued. According to the Congressional Oversight Panel, as of September 1, 2009 only 1.26% of MHA modifications became permanent after the anticipated three-month trial. In the meantime, skyrocketing foreclosure rates are projected to cost Black and Hispanic households between $164 and $200 billion of wealth, pushing true financial security out of reach for many of our families.
The voluntary efforts of the private sector to modify loans has proven to be ineffective. Industry players are not processing loans anywhere near the rate intended by Congress or the administration. In a statement submitted to the U.S. House of Representatives Financial Services Committee earlier this week, NCLR called on Congress to:
• Make participation the modifications of eligible loans mandatory and enforceable for all companies that accepted taxpayer funding.
• Fully integrate the work of housing counseling providers into the loan modification process by paying them for their work the same way servicers are paid.
• Hold federal programs publicly accountable for spending and performance by releasing data on loan modification approvals and denials by race and ethnicity.
• Enact new tools to prevent foreclosures among the under- and unemployed. Promising models include: allowing judges to modify home mortgages in bankruptcy court; automatic and mandatory forbearance of government-insured loans and those backed by Fannie Mae and Freddie Mac, and other loans held or serviced by companies that received taxpayer subsidies; and affordable loans that can be repaid when the home is sold or the first lien is paid.
Saving homes will save the economy. Temporary fixes will only prolong the foreclosure crisis. In these difficult times, we need leaders who have the courage to focus on a lasting recovery.