Despite new federal and state initiatives, the banking industry continues to fail to adequately address the foreclosure crisis, while new arenas for abuse of consumers and households are now thriving, according to a recent survey by the California Reinvestment Coalition.
The survey of 54 California mortgage counselors, who served 14,796 struggling homeowners statewide in March 2009, found that the most common outcome for their clients is still foreclosure. Only 18 percent of counselors report loan modification as very common. The counselors represent 40 of about 80 HUD-certified nonprofit mortgage counseling agencies in the state.
"Our survey shows that little is actually being done, despite countless statements from servicers that they are helping borrowers," said Associate Director Kevin Stein, the report´s author. "It is unclear if federal or state plans are working. Early returns are not positive, and this is true despite the fact that loan servicers have already received $15 billion from the Obama Administration to offer loan modifications."
Evictions of innocent tenants are growing, often carried out by large national banks in their role as trustees on pools of mortgage loans.
The report "The Ongoing Chasm Between Words and Deeds V," is part of a two-year series of survey reports providing snapshots of whether mortgage loan servicing companies are living up to their public commitments to help borrowers avoid foreclosure.
Key findings include:
Fraudulent and deceptive lending practices fueled the current crisis, and have driven distressed homeowners to seek help. Nearly half of counselors cited broker or lender fraud in the loans they are seeing, and 65 percent said they see clients who are non-English speakers and were given English-only documents.
Loan servicers are still not working to solve borrowers´ problems and modify their loans. Loan modifications, when they occur, are likely to be short-term with very few principal reductions, which many underwater borrowers need.
Borrowers´ desperation has fueled a new predatory industry of high-cost loan modification "specialists" who are charging thousands of dollars in fees but providing little to no service. 68 percent of counselors reported seeing more loan modification scams than six months ago. 29 percent of counselors reported that ads for the companies reference the President´s Home Affordable Modification Program.
The impacts of the foreclosure crisis are severe for tenants as well. Nearly three-quarters of counselors noted that tenants living in homes subject to foreclosure are common, and that it is very common for tenants to be denied their security deposits in eviction.
For more information and a full copy of the report please visit this website.
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