Federal Foreclosure Relief Program Not Working
Over the course of the last two years, the federal government has attempted to implement no less than three foreclosure relief programs designed to help homeowners who are facing foreclosures. The latest program, identified as hold affordable modification plan or HAMP, is a 75 billion dollar attempt to provide some relief for homeowners who face losing their homes.
The problems with this latest program are widespread. The idea behind the program is to get banks and mortgage lenders to reevaluate loans and see if the terms of the loans can be modified in such a way as to make it possible for the owners to come out of default and pay off their mortgage. Under the terms of the program, every primary mortgage is supposed to be evaluated and an attempt made to modify the loan before proceeding to foreclosure.
The guidelines set down by the Treasury Department, which oversees the program, have changed several times since the program's implementation. This causes extra headaches for lenders and mortgage servicers because they have to re-train their staff each time the Treasury Department makes these changes. It also adds a great deal of confusion to an already difficult situation.
Because of the confusion involved and the expense of training personnel, many banks and lenders fail to evaluate loans and determine if they qualify for modification before proceeding with foreclosure procedures.
Another problem that plagues this program is the fact that homeowners are being notified that their loan qualifies for modification while the bank continues foreclosure procedures through a separate department. In layman's terms, this is a case of the right hand does not know what the left hand is doing.
In addition, many lenders are turning down applications for loan modification without providing any reason or statement as to what the homeowner could change or correct in order to qualify. This practice leaves homeowners and their attorneys completely in the dark as to how to go about appealing the decision or even determining if the loan was properly reviewed before decision was rendered.
Another cause for problems lies directly in the government's lap. The Treasury Department has not revealed publicly the formula that was created for the purpose of determining which ones do or do not qualify for modification under the HAMP program. Without having access to this formula, it is impossible for homeowners or attorneys to verify the math used in the calculations that lead to a denial. It is possible that the bank has faulty information about a person's income or other bills that would have a direct impact on the status of their loan.
One of the more far-reaching problems with this program is the fact that it does not provide any assistance for individuals who have lost their jobs due to the recent recession. At the beginning of this major foreclosure crisis, the most commonly cited reason for foreclosure and default on loans was the interest rates and the number of subprime loans banks had extended. Today this is not the case. More people are defaulting on their home loans and facing foreclosure because they have lost their jobs and been unable to find other employment in time to save their homes.