Bigger Incentives To Avoid Loan Modifications
Senior officials from the Obama administration pressured executives from financial firms and mortgage servicers earlier this week when they met to step up their efforts in modifying loans for homeowners who are having troubling making monthly payments. Servicers, apparently, promised to increase the rate at which they’re performing loan modifications, according to a press release from the U.S. Department of Housing and Urban Development.
But a story in today’s New York Times suggests that mortgage companies aren’t too eager to help homeowners because those companies collect hefty fees on delinquent loans. “The longer borrowers remain delinquent, the greater the opportunities for these mortgage companies to extract revenue – fees for insurance, appraisals, title searches and legal services,” the story notes.
Even the incentives that federal government is providing to servicing companies — $1,000 for each modified loan and $1,000 a year for each of the next three years that a loan remains current – are outweighed by the fees that are collected from delinquency, according to experts quoted in the article.
For the thousands of Connecticut homeowners who are struggling to hold onto their homes, that story must be pretty infuriating.
In Connecticut, the number of homeowners at risk of foreclosure has grown. There were 11,789 lis pendens filings from January through May 2009, up 25 percent from the same period in 2008, according to The Warren Group.
In addition, 2,188 owners have lost their properties to foreclosure. The number is only slightly higher than a year earlier, and that’s probably because there have been efforts on the statewide level to aid homeowners.