If you got robbed and went to the authorities, you would think they were crazy if they told you to go back to the person who robbed you and ask for your money back, right?
If you got robbed and went to the authorities, you would think they were crazy if they told you to go back to the person who robbed you and ask for your money back, right?
Well, when you peel back the layers on the government’s so-called mortgage bailout proposal, that is essentially what is being asked of homeowners facing foreclosure: To renegotiate their loans with the shady lenders that put them in these bad loans in the first place.
Although the $75 billion bailout proposed by President Barack Obama goes further than the previous administration’s by providing banks with incentives to work with desperate homeowners, the plan gives lenders too much say so over who gets help and to what extent. I’m afraid that many homeowners seeking to modify their loans will not get the savings they’d hoped for and will still face the potential loss of their homes.
Furthermore, even with incentives, I question the sincerity with which many lenders may approach loan modification. Homeowners should realize going in that the lenders are still looking out for their own best interests.
Recently, I spoke to Margaret Wooten, director of our foreclosure prevention program at the Chicago Urban League, about the bailout proposal to get a better understanding of its provisions. Wooten has counseled countless desperate homeowners through the loan modification process. Unfortunately, she confirmed my fears about what’s lacking in the plan.
“Most lenders are not that willing to work with the homeowner,” said Wooten, who negotiates with lenders on behalf of homeowners and has had success at significantly lowering payments. “They’re tacking fees and delinquent amounts onto the already higher loan payment, and that’s causing homeowners’ monthly payments to increase. The banks may reduce interest for a limited period but after that time is up, the homeowner will revert back to the loan amount they couldn’t afford to pay."
Arguably, too much autonomy in the lending community is what got us into this mess. For sure, temporary fixes are not the goal. Homeowners facing foreclosure need permanent solutions to regain their financial footing.
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