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HAMP Foreclosure Prevention Slowed Because Lenders Lack Accountability

October 23, 2009

As Placentia loan modification attorneys, we are fully aware of the problems homeowners have encountered when they try to take advantage of the Home Affordable Modification Program. Lenders participating in the program, which is part of the Obama Administration's efforts to fight foreclosure, have been criticized repeatedly for their low participation and numerous incorrect denials to borrowers applying under the program. An Oct. 15 article by the Associated Press offers one explanation for these problems: HAMP gives lenders very little oversight, few obligations to borrowers and establishes no appeals process for borrowers who were incorrectly turned down. In fact, the article said, lenders did not even have to explain their reasons for rejecting applications until recently.

The article illustrated this problem with the story of Maryland homeowner Towana Gooch. After losing her job, she was pleased to enroll in HAMP, which her bank, Wells Fargo, said would cut her mortgage payment in half. But after her first payment, which was withdrawn automatically from her bank account, Wells Fargo kicked her out of the program, saying her payment was seven cents short. It later reversed that, saying her income was the real problem. In any case, she couldn't make the larger mortgage payments once she was kicked out of HAMP. Wells Fargo was scheduled to foreclose on Gooch's townhouse Oct. 16, but held off after a call from the Associated Press.

The Treasury Department, which administers HAMP, doesn't have firm numbers on how many homeowners have been wrongly rejected from programs because of clerical errors like this. However, the department acknowledges that it is a problem, and in fact has asked mortgage buyer Freddie Mac to audit banks' decisions, so it can work with lenders to correct problems. The government has also set up complaint hotlines and asked lenders to set up internal appeals processes. And, starting in December, all participating lenders will be required to make public reports explaining why certain homeowners were not accepted into the program. The Obama administration asked Freddie Mac to investigate rules that would penalize lenders for wrongful denials.

We're pleased to see the federal government taking action against lenders whose mistakes have devastating consequences for the families behind these mortgages. But as Riverside County loan modification lawyers, we believe this neatly illustrates the problems that come from failing to put significant oversight in place when dealing with lenders. The housing crash that led to this foreclosure crisis had many causes, but poor (and sometimes predatory) lending decisions by banks was one of them. HAMP itself was started in part because lenders were not willing or able to make enough loan modifications on their own. And numerous borrowers have come to the media with horror stories like Gooch's, involving mixed messages, bureaucracy and mistakes that led them into foreclosure. After all that, we think it's clear that lenders are either too reluctant or too incompetent to be trusted when borrowers' homes and futures are at stake.

Based in Anaheim, Howard Law LLP represents borrowers throughout California who need help convincing their lenders to consider a loan modification. Many of our clients come to us with stories like Gooch's, in which the bank gave them multiple stories, repeatedly lost paperwork or otherwise demonstrated that it simply didn't care to give the request enough attention. In cases like these, involving an Escondido loan modification attorney can make a big difference -- because banks know that when attorneys get involved, a lawsuit may be coming next. In fact, we are more than happy to sue a lender if we find evidence of predatory lending or other serious wrongdoing. However, winning a lawsuit is less important to us than winning a fair loan modification that lowers monthly payments for good and keeps clients out of foreclosure.

Howard Law offers free, confidential consultations for all potential clients, so there's no risk and no cost for speaking to us about your case. To set up a case evaluation, you can call us toll-free at 1-800-872-5925 or contact us through our Web site.