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State Group's Report Says More Aggressive Effort Needed Against Foreclosures

January 25, 2010

Our Rancho Cucamonga loan modification attorneys have read scores of articles in the past year about the ineffectiveness of most anti-foreclosure efforts, public and private. A new study by state banking regulators and attorneys general confirmed that problem yet again, according to a Jan. 20 article from Dow Jones Newswires. The State Foreclosure Prevention Working Group reported that despite efforts from homeowners themselves, loan servicers and government agencies, foreclosures are likely to actually increase in 2010. The recommendations from the group, whose members include California Attorney General Jerry Brown, included a call for principal write-downs (or cramdowns) to decrease the chances of another default.

The report (PDF) is based on two years of data from 13 mortgage servicing firms. Most disturbingly, it found that only four in 10, or two-fifths, of borrowers in default were even involved in a "loss mitigation effort." As of the end of October 2009, there were 1.7 million borrowers who were at least two months behind in their payments. Meanwhile, in the year between October 2008 and October 2009, the number of loans in foreclosures jumped by 52%. The study also found that the proportion of prime loans in default increased 21% between 2007 and 2009. And more than 70% of loan modifications that are granted actually increase the principal owed, the report said, while only 9% of loans got a principal reduction reducing the balance by more than 10%.

As Fountain Valley loan modification lawyers, we're disappointed to hear that principal is actually added in so many loan workouts. Several studies, as well as common sense, show that negative equity increases the chances that the loan will go into default. It's quite clear by now that banks do not like principal reductions; lobbyists for the financial services industry fought tooth and nail against a proposal to allow mortgage cramdowns during bankruptcies. However, lenders may actually lose more than 10% in a foreclosure or bankruptcy -- and current policies seem designed to force one of those choices. If lenders and servicers are serious about keeping borrowers in their homes, it's clear that they should seriously reconsider principal cramdowns.

Howard Law PC negotiates aggressively on behalf of homeowners who need help ensuring that their banks will play fair. We have successfully won changes to loan structures, interest rates and sometimes even loan principal for our clients. That's true even when the lender been unresponsive to the borrowers themselves, ignoring letters and phone calls or trapping borrowers in endless red tape. We believe this success has a lot to do with the fact that we are San Clemente loan modification attorneys, which puts banks on notice that we understand our clients' legal rights. In fact, we review every new case for negligence or predatory lending that allows us to sue the bank, if appropriate, and stop a foreclosure right away.

If this sounds like your situation, don't hesitate to contact Howard Law for help. To learn more or schedule a free, confidential case evaluation, please call us toll-free at 1-800-872-5925 or contact us through our Web site.