LevonP
12-20-2009, 10:26 AM
The U.S. House of Representatives has narrowly voted to approve a sweeping overhaul of the financial services industry, adding new layers of regulation to banking, brokerage and insurance services. The measure now goes to the Senate.
The bill, among other things, establishes a Consumer Financial Protection Agency that would add protection to consumers' dealings with banks, credit card companies and other financial institutions.
The lawmakers stopped short of giving bankruptcy judges the power to unilaterally reduce mortgage amounts, also known as "cramdown," despite supporters' claims that it would help more people stay in their homes.
The financial services industry lobbied against the measure, arguing that such a provision in the law would encourage more people to file bankruptcy and would ultimately lead to higher interest rates.
Democrats pushed for the "cramdown" provision in the wake of more evidence of failure in government and industry efforts to modify problem mortgages. Ultimately, the House voted 241-188 against the amendment.
Modification programs show few results
Earlier this year the Obama Administration launched a massive mortgage modification program, designed to help struggling homeowners renegotiate more favorable mortgage terms. The plan was the latest of several launched by the government to slow the housing meltdown and keep buyers in their homes.
However, very few of the applicants have successfully gotten their mortgages modified by their lenders. So few homeowners have successfully completed the program that the Obama administration recently called lenders on the carpet to get answers as to the program's lack of success.
In the last year ConsumerAffairs.com has received hundreds of complaints from consumers who said they followed loan modification instructions, faxing requested documents repeatedly, only to have their applications disappear into a black hole.
"I have gone through the modification process but have been denied, although no clear explanation was provided," Jason, of San Diego, told ConsumerAffairs.com. "I have been seeking assistance and guidance from quite a few bank representatives and have only received rude, misguided information."
"We sent all information requested by certified mail," Regina, of Whitefish Bay, Wisc., told ConsumerAffairs.com. "As the others have described, we have had to make contact. They do not respond. The usual answer is 'Whoever told you that is wrong.' I actually have a tape of one of their agents stating 'I can't be responsible for what someone else told you.' Should not they be required to respond in writing? Is this not a government funded program?"
Regardless of the loan servicer, the story seems to be the same. Consumers start down a road they think will lead to a modified mortgage, only to meet a wall of incompetence and indifference at the mortgage company.
Do banks prefer foreclosures?
An October report by the National Consumer Law Center (NCLC) says it's no mystery why loan servicers seem to be dragging their feet in modifying troubled mortgages. The report suggests these companies actually stand to profit if the troubled property goes to foreclosure.
The report, "Why Servicers Foreclose, When They Should Modify, and Other Puzzles of Servicer Behavior," claimed that servicers, unlike investors or homeowners, generally don't risk losing money on foreclosures.
"One common-sense solution to the foreclosure crisis is to modify the loan terms in more instances," said Diane Thompson, attorney with the NCLC and author of the report. "Foreclosures are a costly ordeal for the homeowner, the lender, and the community. Yet they continue to outstrip loan modifications because servicers have no incentive to help borrowers stay in their homes."
Read more: http://www.consumeraffairs.com/news04/2009/12/cfpa_house_passage.html#ixzz0aG57KwTm
The bill, among other things, establishes a Consumer Financial Protection Agency that would add protection to consumers' dealings with banks, credit card companies and other financial institutions.
The lawmakers stopped short of giving bankruptcy judges the power to unilaterally reduce mortgage amounts, also known as "cramdown," despite supporters' claims that it would help more people stay in their homes.
The financial services industry lobbied against the measure, arguing that such a provision in the law would encourage more people to file bankruptcy and would ultimately lead to higher interest rates.
Democrats pushed for the "cramdown" provision in the wake of more evidence of failure in government and industry efforts to modify problem mortgages. Ultimately, the House voted 241-188 against the amendment.
Modification programs show few results
Earlier this year the Obama Administration launched a massive mortgage modification program, designed to help struggling homeowners renegotiate more favorable mortgage terms. The plan was the latest of several launched by the government to slow the housing meltdown and keep buyers in their homes.
However, very few of the applicants have successfully gotten their mortgages modified by their lenders. So few homeowners have successfully completed the program that the Obama administration recently called lenders on the carpet to get answers as to the program's lack of success.
In the last year ConsumerAffairs.com has received hundreds of complaints from consumers who said they followed loan modification instructions, faxing requested documents repeatedly, only to have their applications disappear into a black hole.
"I have gone through the modification process but have been denied, although no clear explanation was provided," Jason, of San Diego, told ConsumerAffairs.com. "I have been seeking assistance and guidance from quite a few bank representatives and have only received rude, misguided information."
"We sent all information requested by certified mail," Regina, of Whitefish Bay, Wisc., told ConsumerAffairs.com. "As the others have described, we have had to make contact. They do not respond. The usual answer is 'Whoever told you that is wrong.' I actually have a tape of one of their agents stating 'I can't be responsible for what someone else told you.' Should not they be required to respond in writing? Is this not a government funded program?"
Regardless of the loan servicer, the story seems to be the same. Consumers start down a road they think will lead to a modified mortgage, only to meet a wall of incompetence and indifference at the mortgage company.
Do banks prefer foreclosures?
An October report by the National Consumer Law Center (NCLC) says it's no mystery why loan servicers seem to be dragging their feet in modifying troubled mortgages. The report suggests these companies actually stand to profit if the troubled property goes to foreclosure.
The report, "Why Servicers Foreclose, When They Should Modify, and Other Puzzles of Servicer Behavior," claimed that servicers, unlike investors or homeowners, generally don't risk losing money on foreclosures.
"One common-sense solution to the foreclosure crisis is to modify the loan terms in more instances," said Diane Thompson, attorney with the NCLC and author of the report. "Foreclosures are a costly ordeal for the homeowner, the lender, and the community. Yet they continue to outstrip loan modifications because servicers have no incentive to help borrowers stay in their homes."
Read more: http://www.consumeraffairs.com/news04/2009/12/cfpa_house_passage.html#ixzz0aG57KwTm