Fix or Evict? Families Facing Eviction Outnumber those Who Received a Loan Modification By 12 to 1

Banks’ Foreclosure Bias Hurts Investors

New research by the Center for Responsible Lending finds that banks and other loan servicers often foreclose when investors have more to gain from a loan modification. The study—“Fix or Evict? Loan Modifications Return More Value than Foreclosures”—also finds that the industry’s poor track record on loan modifications can’t be blamed on homeowners who re-default.

The research involved running more than 1,500 simulations of the test used by loan servicers to determine whether to modify distressed mortgages or foreclose. CRL found that even with hypothetical re-default rates as high as 79%—much higher than actual rates—reducing a homeowner’s monthly payment by up to 20% is better for investors than foreclosure. The analysis shows that the objective cost-benefit analysis favors a much higher proportion of payment-reducing mortgage modifications than we now see. Families facing eviction now outnumber those with a modification 12 to 1.

“It’s well documented how mortgage servicers’ unfair, shoddy practices have hurt homeowners,” said Mike Calhoun, president of CRL. “This research shows that servicers also routinely give the investment community a raw deal.”

The results of the research have wider implications for ordinary Americans, since many of these mortgages are part of securities held by small banks, life insurance companies and pension companies. By regularly ignoring investors’ best interests when deciding whether to foreclose or modify a distressed loan, banks and other mortgage servicers are draining retirement savings and other investments that businesses and households rely on.

Bill Frey, President of Greenwich Financial Services and a longtime investor advocate, said, “Mortgages in securities often won’t get fixed voluntarily, even when a modification would prevent foreclosure, because banks’ interests are misaligned with the best interests of the investors. It pays for banks to keep mortgages in a state of suspended animation, because they can collect late fees while also protecting second mortgages that are in the bank’s portfolio. The misalignment of economic interests between the owners of mortgages and those who service them is the single reason why the mortgage problem has become a crisis and a massive economic drain on this country.”

“Fix or Evict?” shows that loan modifications that reduce mortgage payments are more often than not good for investors. This also is corroborated by recent data from the Home Affordable Modification Program (HAMP), which shows that four out of five households who received HAMP modifications are still current on their mortgages. This record is better than the general performance of modified loans, since mortgage modifications made under HAMP more often reduce borrowers’ payments and generally perform better than those made outside HAMP.

“Servicers have been allowed to follow their own voluntary loan modification program, and the result has gone against the best interests of everyone but the servicers themselves,” said Calhoun. “We need mandatory reforms that ensure servicers follow the law and act in the best interests of their clients—that would end up benefiting everyone.”

For more information: Mary Moore at (919) 313-8532 or mary.moore@responsiblelending.org; Ginna Green at (510) 379-5513 or ginna.green@responsiblelending.org; or Charlene Crowell at (919) 313-8523 or charlene.crowell@responsiblelending.org.

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4closureFraud.org

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Fix or Evict? Loan Modifications Return More Value Than Foreclosures
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Comments
6 Responses to “Fix or Evict? Families Facing Eviction Outnumber those Who Received a Loan Modification By 12 to 1”
  1. Fury says:

    I hope the person who posted about their grandparents having survived the holocaust and are now fighting fraudclosure will see my post.

    i have seen the devastation caused by fascism —– friends and family who lost their families to the death camps,
    money and property seized by the nazis and later the communists in europe.

    they were all different religions – catholic in poland, russian orthodox in serbia, jewish in Czechoslovakia, and lutheran in france.

    they all met with death and destruction.

    we will not let this happen again! we need to stand tall. we are in this together. the fraud has been revealed.

    the banks have plundered our nation and the world. a greedy few have pulled us all down. we will fight back. we are fighting back!

    they are villains, fraudsters. they have caused the global monetary collapse. we will hold them responsible!
    they have the money to pay us everything that they owe us.

  2. Pamela says:

    These bankers are the lowest of the low life,they decided that our children should never have advantages or have a decent life.So evidently its okay to pick on children cause thier expendable.Who cares because children cannot protect themselves.Wow wage wars on children.

  3. It has always amazed me that the lender justifies charging the least able to afford it, the highest rate of interest that seems to be an intentional scheme orchestrated by BANKSTERS to cause default and foreclosure while preying on those least able to afford a house and remain stuck in society as a tenant..

    For example, there are all those car commercials on tv promoting 0% interest, as if they really had any real funds or money on account and deposit in the vault to lend, and then have the huge body of little text size flash on the screen, that the best speed reader could not even begin to read before it vanishes, that is supposed to serve as a notice to everyone – and – let me interpret – “You will not qualify for this, this is a bait and switch scam to talk you into a high rate interest contract,, without full disclosure for unjust enrichment, that will take the food out of the mouths of your family because we need all that interest for the high risk we are talking making a loan to someone so unworthy as you.”

    It is logical that those least able to afford things in life also can not afford high rates of interest.

    There are charity minded groups you can find on the internet today, that recognize this factor and are providing loans to people who need and want to start a small business that you can invest in. These conscientious lenders of good will standing, also provide diligent counseling to make sure these borrowers do not fail, by not being overextended with interest, that is not at all reasonable at all for anyone. Certainly only those that are rich can afford a higher rate of interest and certainly not the poor!

    Think about it – Who is going to fail first – the borrower earning $10,000.00 a year with a family of five to feed and house that needs a home or car and purchasing something with excessively high interest so that the monthly payment, instead of being within means of say $50 is instead $250.00, or the rich person with millions of dollars to his credit, that is charged 0% interest, but lives also beyond his means, rather than within his means and fails to refuse all credit, by paying as you go and can sensibly afford to pay from savings and not being slave to credit and the lender deception and illusion of debt. Note the absence of the question (?) mark at the end of the preceding statement – this is a rhetorical question for good reason (or perhaps you need to come to an answer concerning this in your life).

    Food for thought, is a belly full of satisfaction, so keep smiling, for as we all know, a frown is not pleasant to look at 🙂 .

    XXXOOO

    “T”

    • Turn out the lights says:

      How refreshingly nice to point out something I could not understand, little ole me being an 8th grade dropout could not understand this very point of charging high interest to lower income people and lower interest to rich deadbeats who are hiding behind all their money. We all know that the banks are the biggest deadbeats when it comes to their own, and will screw anyone over if it would give them more benefits in their pocket. That is why they have to use underhanded tricks to take from people who really value what they need not own. The only reason we poorer set get taken so easily is because the banks use tricks in their business the normal society with normal morals don’t use because we have somewhat more morals then they do, and therefor don’t use to get what they need. The high businessman only thinks of their bottom line and how they can gain the most wealth from their fraudulent behaviour. We poorer peoples are really the proper owners of the world, because we were promised that we could gain all the needs we ask, if only we have faith, and therefor why we are deemed the deadbeats, because we would rather provide food, which is a need over say a home mortgage payment, which is a most needed item of life, but we will still survive without if need be. We may be out on the street but our life would still be maintained for another day. The bible gives strict advise about credit, and still we live in such a credit based society that has no intention on giving up just 10% of their riches to help underprivileged people of earth. Why do bankers and lenders take advantage of the poor? Because they can, knowing full well what they do is morally wrong and socially wrong and against the laws of the people, but also understand it’s the strong that defeats the weak, and being weak by means of being defrauded by all the governments of the world is what separates us, but also seals our fate. Why are we being left behind? because it’s mans desire to be the best of all the best and gain all the power that money can buy. The wealthy base their success by the amount of money and materials they own, when the truth is we all are born with nothing and die with nothing, but who do you think will inherit the next world after we die. Asking a rich man to give up his wealth or trying to get a camel through a needles eye are both impossible, but the result is the same. No Matter how much power or money you have, you still won’t be able to take it with you. But how people remember you for what you are is something that won’t die away, good or bad.

  4. l vent says:

    WE THE PEOPLE THINK THAT IT WAS CONGRESS WHO WERE THE INVESTORS WHO GOT PAID FROM TARP. THIS WAS AN INSIDE JOB. RESCIND OUR LOANS, GIVE THE PEOPLE BACK THEIR STOLEN HOMES AND MONEY. CONGRESS SWINDLED AND THEN ROBBED AMERICA!!!!!

    • RAMONA says:

      what have they done with the money from lawsuits? when are the homeowners going to see any of it? we know that will be never.

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