Homeowners welcome new loan modification plan

November 30, 2009 5:57:52 PM PST
On Monday the Obama administration announced new plans to force banks that have received billions in government funds to give more Americans loan modifications. The idea is to help homeowners avoid foreclosure, but it may be too little, too late.

The Obama Administration. committed $75 billion in financial incentives to try to get banks to grant more loan modifications, but the process is painfully slow. President Obama wants the banks to speed up or be penalized.

"I have submitted probably five, maybe six, loan modification packages," said Faye Crosley from Richmond.

Crosley has spent the last year trying to get a loan modification to save her home of nearly 20 years. Crosley fell behind in her mortgage during a battle with cancer. Now that her income is stable again, the bank still won't give her a modification.

"They've never responded, so I don't know why they wouldn't offer me a loan modification," said Crosley.

Crosley's predicament is the kind Obama hopes to address with a new push to get lenders to grant more loan modifications or make temporary ones permanent.

"The modification market is evolving for what... maybe less than a year?" said Chris George with the California Mortgage Bankers Association.

Mortgage lenders argue if the banks are slow, it's because the process is still so new.

"I think the lenders at times are trying to figure out what the investors want in terms of documentation, to make sure it's a compliant modification. I think they're also trying to figure out what the administration wants," said George.

Gabriela Flores and her husband had a temporary modification, something their bank granted them after they both lost their jobs, but it expired last month.

"We're just hanging in there, just waiting to hear from the bank... to see what happens," said Flores.

Pittsburg's Pacific Community Services is currently counseling hundreds of clients in a similar predicament.

"We need the trial modifications to be turned into permanent. Better yet, let's not even do the trial. Let's go straight to the permanent loan modification, so these homeowners can have some type of closure," said Elaine Brooks-Cox from the Pacific Community Services.

Now, under the administration's new plan, the banks would have to give the U.S. Treasury Department regular updates on the pace of their loan modifications. Those that underperform could face stiff fines.


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