COMMENTARY: by JONATHAN FOXX
Jonathan Foxx, former Chief Compliance Officer of two publicly traded financial institutions, is the President and Managing Director of Lenders Compliance Group, the first full-service, mortgage risk management firm in the country.
The foreclosure crisis has taken on new dimensions with the Obama Administration's apparent view that accepting the huge wave of foreclosures may be necessary and inevitable.
But have the borrowers who face foreclosure really been given every opportunity to save their homes?
Failed government programs, overwhelmed servicers and lenders, lack of systemic alternatives, and the absence of a coherent national plan or specially empowered agencies to stabilize the pandemic of foreclosures are depriving borrowers of ways and means to recover from this crisis.
"I've proposed a new Home Owners' Loan Corporation (HOLC), to launch a national effort to help homeowners refinance their mortgages. The original HOLC, launched in 1933, bought mortgages from failed banks and modified the terms so families could make affordable payments while keeping their homes. The original HOLC returned a profit to the Treasury and saved one million homes.
We can save roughly three times that many today. We should also put in place a temporary moratorium on foreclosures and freeze rate hikes in adjustable-rate mortgages. We've got to stem the tide of failing mortgages and give the markets time to recover." Hillary Clinton - September 25, 2008
The most recent report of foreclosures from RealtyTrac provides the following schematic.
Just this past Friday, the New York Times put the Obama administration's non-response to the foreclosure crisis in bold relief:
"In the most recent mortgage mess, the Obama administration has - oddly and disturbingly - been arguing that foreclosures are, in effect, good for the economy and should proceed apace as banks get their snarled paperwork in order."
However the foreclosure debacle does play itself out - and, let's be clear, there is no truly satisfactory outcome for lenders, borrowers, or the overall economy - it is important to identify who these defaulted borrowers really are: our neighbors, our co-workers, our professional class, our close friends and family, our most educated and least educated, our peers who have been downsized out of jobs, laid off, and whose jobs have been outsourced, our small business owners and self-employed.
For the most part, the foreclosed upon properties have not been demised by deadbeats - or "losers" (Rick Santelli) - or scammers or ignoramuses who would sign anything to own a house. That canard is the main stream media narrative, and it is not true at all. Statistic after statistic support the fact that most loans were underwritten pursuant to agency and investor guidelines, along with proper borrower verification.
Yet now, those same agencies and investors seem to be changing the rules. For instance, HUD is reevaluating the approval authority granted to FHA DE-mortgagees whose defaults are considered excessive, even though those mortgagees' FHA loans were underwritten to FHA guidelines.
And, since the foreclosure tsunami hit, millions of borrowers have endeavored in vain to save their homes through loss mitigation methods and loan modifications, only to find themselves, usually without the benefit of legal counsel, navigating the blizzard of new paperwork requirements in an often futile engagement with unresponsive servicers and intransigent lenders.
In some cases, borrowers in default are taking out second mortgages in order to save their homes - with payment of the proceeds going to their lawyer if the foreclosure is dismissed and the debt is reduced.
Is the appropriate response to foreclosure in this current economic environment to blame the victim?
Government assistance programs, such as HAMP, have been failures. Our servicer and investor clients are particularly frustrated by the enormous task they face to offer alternative loan terms, respond to thousands of inquiries, implement new mortgage instruments, properly execute all legal documents, and consistently and effectively track the progress of mitigated claims.
In the quote above, Mrs. Clinton stated that "We've got to stem the tide of failing mortgages and give the markets time to recover."
Maybe we should give our neighbors and neighborhoods the time to recover as well!
So, What Do You Think?
I would welcome your comments and views.
Please feel free to email me at any time.
LENDERS COMPLIANCE GROUP is the first full-service, mortgage risk management firm in the country, specializing exclusively in mortgage compliance and offering a full suite of hands-on and automated services in residential mortgage banking.