We Need a Real Lifeline
Today’s news of a major effort to stave off foreclosures sounds like another encouraging sign that lenders and the government are working together to tackle the mortgage crisis.
But here’s the problem. All those previously announced attempts to tally up some loan modifications and keep people in their homes haven’t quite worked out, at least not on a widespread scale. And there’s no reason to think this plan will either.
All told, loan modifications affected less than 1 percent of the 3 million loans with adjustable rate mortgages that were outstanding in the third quarter of last year, consumer advocates noted.
There are difficulties on both sides. Lenders say they try to reach out to borrowers, but some won’t respond, either out of fear or a lack of knowledge about workouts. Some workouts don’t reduce the costs of the loan and amount to little more than extended repayment plans, which leave a borrower in the same bind. And there’s no uniform system or requirement for reporting loan modifications, so it’s not clear overall how much is being done, and on what terms.
Until those problems get addressed, we’ll have lots of voluntary efforts with encouraging names like Project Lifeline and Hope Now, but little real change.