Helping Struggling Homeowners

Even though the Federal Government has spent billions trying to help homeowners stay in their homes in the wake of the widest sweeping recession of my lifetime, many are still falling through the cracks. Some places it’s worse than others.

The Tri-State Defender reports on a bill Congressman Steve Cohen has introduced to help homeowners, and some of the realities that struggling homeowners face in this tough economic environment.

From the article:

Usually, a homeowner who misses a mortgage payment has about 15 months before the home is sold at auction, according to Lender Processing Services Inc., which tracks mortgages.

Tennesseans in trouble, however, are riding along the foreclosure fast-track. The typical foreclosure timeline is just two months in this state, Realtytrac, another group reports. Borrowers behind on their mortgage payments don’t have much time to come up with Plan B: a loan from a family member, a second job, or even a short sale.

Why? In many other states, judicial foreclosures are the norm. A company has to go to court to secure a writ of execution to sell a home. Then the home is scheduled for auction, a process that can that can take months. In Tennessee, out-of-court proceedings are most often used. A clause in a mortgage or deed of trust authorizes the lender to sell the property, if the borrower defaults. After the homeowner misses a payment, the trustee assigned in the deed of trust has the authority to begin the foreclosure process and advertise the property for sale.

WOW. Did anyone know that you could lose your home after missing just one or two payments? That’s pure madness!

Thankfully, there may be a solution.

The Preventing Homeowners from Foreclosure Act also would help fund local outreach efforts to make distressed homeowners aware of the program and of special loss-mitigation tools that may help them save homes.

The homeowner-lender conferences seek to ensure that financial institutions are using the loss-mitigation tools put in place by the Treasury’s Making Home Affordable program, the U.S. Department of Housing and Urban Development, Federal Housing Administration and other entities, to help qualified homeowners stay in their homes.

This won’t fix the problem we have here in Tennessee, that will be up to the State Legislature, but at the very least it may provide some relief and assistance to homeowners who are struggling under the weight of their mortgages. We can’t continue to let people who have spent years and thousands of dollars to keep their homes lose them to an economy that is acting more and more like a Black Hole every day.

Kudos to Congressman Cohen on the effort. I hope it passes soon.

1 comment for “Helping Struggling Homeowners

  1. Bill Peters
    July 24, 2010 at 1:10 pm

    Many current foreclosures affect those who can not pay their mortgage. The next wave of foreclosures will effect those who CAN PAY THERE MORTGAGE!

    How can this be that someone who can pay their mortgage will be in foreclosure?

    Mortgages given to home owners on the basis of ‘stated income’ were lured into their loans by the mortgage broker who said that they could later refinance. Those loans were later sold off in bundles leaving the borrower with no place to go as now there are no stated income loans available. That loan type does not exist. When interest rates begin to rise, these ‘toxic’ loans will not be affordable and the next wave of foreclosures will begin. The mortgage broker, the home builder and Wall Street greatly benefited, but the guy holding the bag is the American homeowner who had a ‘stated income’ loan now turning variable and can has always made his payment.

    In my case, I have a credit score of 801, never missed a payment, cash in the bank to pay down some of the principle, but had a bad year in business and my income is down. Also the loan to value ratio is unacceptable due to the other foreclosed properties and short sells in the area.

    In short, I can not get another loan, but my tax dollars went to save the same banks that are now ready to put me in the street. I can pay my mortgage, I can pay down my principle and I need a loan before my current variable loan becomes toxic.

    Anyone can rush forward to hold back an existing problem, but it takes insight to stop a problem that is on the way and will be the next wave of the mortgage foreclosure crisis.

    Solution: Have any loans that were granted on a ‘stated income’ basis be allowed to roll over into another loan (30 fixed, or other shorter term loan) for those who have never missed a payment and by making those payments, has shown an ability to make their loan good. No amount of paper work or credit score research can be a better statement as to the value of the homeowner to make their payment than an actual record of making payments. These people have proven themselves to be a good risk by their example. Allow these homeowners the ability to keep their homes. This will cost the government nothing; there will be less foreclosures and the housing market will bounce back sooner than later due to these responsible people keeping their homes and the banks doing the right thing for a change.

    My suggestion allows for fairness, it will have a positive impact on the housing market and the entire economy at no cost to the government or the banking industrial complex. In short, it is a good idea that needs to be implemented before this predictable next wave of foreclosure begins.

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