If you are among the many people who can’t currently qualify for a refinance a loan modification is likely you only alternative. The problem is that getting banks to modify loans is still very difficult. For that reason the Fed is calling an all-hands meeting to apply more pressure on banks to modify more loans. See a recent NYT article on the subject here. And here are a few highlights:
The subject of the meeting is going to be loan modifications. Specifically, the government is going to be asking — in none-too-friendly fashion — why the nation’s big servicers aren’t doing more to modify loans for homeowners who are in danger of defaulting on their mortgages.
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And yet, five months later — and two years into the housing bust — the rising tide of foreclosures remains the single biggest threat to economic recovery. In 2005, at the height of the bubble, there were some 800,000 foreclosures. This year, sadly, we are on pace to see 3.5 million foreclosures, with no end in sight. “On Main Street, the recovery will begin when foreclosures stop,” said Senator Jack Reed of Rhode Island, who has been pushing the Treasury Department to get mortgage relief more quickly to homeowners at risk of foreclosure.
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What’s more, the anecdotal evidence strongly suggests that homeowners looking for assistance face enormous frustration, and even resistance, from servicers. A few weeks ago, this newspaper published a startling front-page story documenting the difficulty borrowers faced just getting basic information from their servicers. Waiting two months just to get a call returned is not uncommon.
“We believe there is a general need for servicers to devote substantially more resources to this program for it to fully succeed and achieve the objectives we all share,” wrote Mr. Geithner and Mr. Donovan in their letter.
