In a move which must come as a surprise to nobody, the federal government is working on passing a new bill to give additional power to previously-failed government programs and reward far more financial institutions for engaging in fraudulent and predatory practices. The Helping Families Save their Homes Act of 2009 was passed by the House of Representatives this week and serves both of these purposes.
Among the major purposes of the bill is to loosen some of the strict requirements on homeowners and lenders to participate in the government’s HOPE for Homeowners program. Considering that being instituted in 2008, the FHA-administered program has been given close to $320 billion and has helped a single family facing foreclosure. This is so bad that even the government itself is disappointed with the results.
Nonetheless, the bill also provides a safe harbor for mortgage servicing corporations to shield them from liability. RealEstateRama reports that “The bill delivers a safe harbor from liability to mortgage servicers issuers, trustees, loan sellers, depositors, and any other individual to the extent the person’s cooperation is needed to permit the servicer to engage in loan modifications, so long as the servicer supplies a modification consistent with the Administration’s program or it utilizes Hope for Homeowners.”
Mortgage servicing firms have been pushing undeserving homeowners into foreclosure for decades, and the documented complaints against such practices are nearly endless. But now, so long as these companies participate in a loan modification with government guarantees, they are able to be protected liability? It seems that such a provision will just encourage additional moral hazard on the portion of servicers.
Numerous times, mortgage servicers have engaged in fraudulent actions created to improve fees and interest for homeowners long just before they fall behind on their mortgage. This raises the profits of the servicing corporation and the holders of the loan. Most of the time, these extra charges could go unnoticed forever, as homeowners sell or refinance and pay off the mortgage with out examining how the final payoff was calculated.
But if a homeowner falls behind on their payments, sometimes consequently of actions for instance placing forced insurance on a home unnecessarily, the servicer will quickly begin foreclosure as well as accelerate fees and interest charges even faster. It may possibly be impossible for the owners of the property to prove to the firm that the insurance is important or they’re not even behind on payments — the foreclosure continues anyway.
Even the threat of litigation has not stopped servicing organizations from engaging in such frauds. After all, they’ve sufficient cash to hire lawyers who can lie to judges anyway. Homeowners facing a financial hardship or living and working do not have the time or resources for such luxuries as taking benefit of the legal program to enrich themselves at the expense of others.
Mortgage servicing corporations have constantly been reluctant to negotiate mortgage modification agreements with borrowers, also. This is as a result of the reality that they make a lot more money by not working with homeowners, as opposed to dedicating a portion of the servicing fees they receive to loss mitigation departments and staff. It’s in the financial interests of the servicer to let the home go into foreclosure.
But now, with the passage of the Helping Families Save Their Homes Act, this may well change. Servicing firms can continue to go on and fraudulently jack up fees or force insurance on a house and wait for the borrowers to fall behind. Once this happens, they are able to offer you a loan modification in their interests — not the homeowners’ — through the HOPE for Homeowners or other government program, and escape liability for the actions.
Where the report states a necessity these particular modification programs meet guidelines “consistent with the Administration’s program or it utilizes Hope for Homeowners,” it need to be kept in mind that the government programs’ redefault rate is over fifty percent. This indicates that the majority of individuals who get a government guaranteed modification end up back in foreclosure once again within six months — which is where the servicers want them anyway.
Numerous of the government’s programs to help homeowners stop foreclosure appear to have good intentions on top, but each and every one also includes one provision or one more that’s a blatant handout to the banks and financial market. This most recent immunity from liability for servicing corporations is just a different example of how government actions are actually creating the foreclosure crisis worse and encouraging banks and servicers to help keep taking benefit of borrowers.
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