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Critics are worrying that the new loan modification plan initiated by the Federal Housing Administration and major financial institutions may not be sufficient to help a big number of homeowners in danger of losing their homes to foreclosures.
They have pointed out several cases of borrowers in trouble who are seeking help from their mortgage companies but did not receive any. These homeowners, who are waiting for help in making their monthly payments, would lose all hope upon receiving a failure notice from the company.
According to experts, mortgage servicers are focused mostly on loan payments, including the management and distribution of these loans. They lack the manpower and skills to deal with defaults, much more to handle requests from homeowners facing foreclosures. This failure to assist homeowners in their time of need have sown the seeds of distrust that created an impediment for homeowners today to participate in a new program to address this critical issue of foreclosures.
Federal officials have recently announced a new program to prevent foreclosures. This new program is offered to loans handled by Fannie Mae and Freddie Mac, the two mortgage giants that were recently taken over by the government. This new program was modeled after a proposed plan from the Federal Insurance Deposit Corporation who has experienced success when they took over IndyMac Bank.
The said program is targeting homeowners who are delinquent for more than 90 days. Their loans will be restructured to trim down their mortgage payments down to 38 percent of their monthly incomes. This would make their payments more affordable and will come from a reduction of interest rates, extended loan terms or deferred payments. With easier and regular payments, foreclosures could finally be averted.
The Federal Housing Finance Authority urged mortgage servicers and securities investors to follow this new government program and make it a standard for the whole industry. However, critics say that in order to get full support from servicers, the government should make loan modifications from these programs mandatory.
HUD Fair Housing Equal Opportunity