Wednesday, October 13, 2010

Foreclosure Crisis May Finally Force Mr. Potter’s Hand

It could be a wonderful life after all.

There is a growing buzz on Internet blogs that the current loan foreclosure crisis could leverage banks and loan service companies into finally taking a more serious approach towards loan modifications with homeowners having problems with their mortgages.

Under the loan modification alternative to foreclosure scenario banks forced into a corner because of fraudulent foreclosure practices and documentation would see it is in their interest to modify a homeowners loan rather then getting nothing. Thus bankers fearing loses or lawsuits from investors who hold these bundled securities may be force into a willingness to work out a loan modification with a delinquent homeowner rather then foreclose.
"A coalition of as many as 40 state attorneys general is expected Wednesday to announce an investigation into the mortgage-servicing industry, an effort some of them hope will pressure financial institutions to rewrite large numbers of troubled loans. The move comes amid recent allegations that mortgage-servicers, which include units of major banks such as Bank of America Corp., submitted fraudulent documents in thousands of foreclosure proceedings nationwide [...] The attorneys’ general immediate aim is to determine the scale of the document problems and correct them. But several of them have said that the investigation could force the lenders and servicers to agree to mass loan modifications or principal forgiveness schemes. Other possibilities include financial penalties or changes in mortgage servicing practices. Lenders and servicers have largely resisted reducing principal on mortgages, instead focusing on interest-rate reductions or term extensions. Banks say they are worried about lawsuits from investors, some of whom could lose money in a principal write down. Former New Jersey attorney general Peter Harvey, now a trial lawyer in New York, said that a settlement with state attorneys general would likely “to give the banks some cover” to make changes that might otherwise result in lawsuits by investors in mortgage-backed securities."
If so, the fraud-ridden mortgage crisis could morph into a program that would force the greedy bastards to do what the Obama administration’s loan modification program apparently couldn’t. Any politician worth his salt should be jumping at the chance to submit legislation to make the process of loan modification easier for the bank and the homeowners involved.

So, screw you Mr. Potter!

No comments:

Post a Comment