Lately, it seems as if housing news is just one bad thing after another, and the most recent information indicates that things have not yet begun to look up. According to Reuters, one in eight homeowners across the United States is either paying in arrears or is in foreclosure.
This is an astounding number for anyone to reconcile, despite the fact that this number is comprised largely of very concentrated geographical regions. As an attorney practicing both consumer bankruptcy and real estate law in western Massachusetts however, I am still seeing the issue arise nearly on a daily basis. Between both subprime and prime adjustable rate mortgages, and rising unemployment, staying on top of payments has quickly become a near impossibility for many, and for some reason, lenders are still resistant to modifying loans.
In instances where modification might actually be an effective remedy, this resistance on the part of lenders is a great problem. Their failure to modify loans before a borrower is at or near the point of foreclosure, coupled with the fact that consumers are facing less and less ability to come up with money owed in arrears, is creating a vicious cycle of foreclosure. This failure on the part of lenders is also leading to a greater exacerbation of consumers needing to file for bankruptcy protection and banks being forced to write uncollectible bad debt off of their books.
I have an elderly client, for example, who has been referred to me to modify a negatively amortizing mortgage on her home. She is less than thirty days behind on payments and not yet approaching foreclosure, but she lives on a very small fixed income and will undoubtedly default if she cannot get into a fixed rate, traditional mortgage. I have made multiple phone calls and have spent hours researching how I might assist this woman. Yesterday, I finally reached a call center for Wachovia that recognized my client’s loan number. I was told that Wachovia is not doing any loan modifications until further notice and there is currently no procedure for applying to modify the very loans that are jeopardizing our banking system. As is the case with many other big lenders, Wachovia is sitting on its hands, ostensibly waiting for the next infusion of federal bailout money.
Many homeowners are unable to sell because of the slow real estate market or because they owe more on their mortgage than the house is worth. Most are also ineligible to refinance for credit reasons because lenders have become understandably and necessarily conservative since the subprime crisis came to light, or because they lack sufficient equity in their homes. And to compound all of this, lenders seem to often prefer foreclosures to the reasonable modification of completely unreasonable mortgages.
In the meantime, one in eight homeowners waits to see what the future holds, while consumer attorneys continue trying to pave a road that lenders seem to want to plow up right behind us.
By: Greta LaMountain, Esq.
