After investigations found that
abusive practices were widespread in the mortgage industry, regulators clamped down on some of the worst practices. But Paul Kiel at ProPublica finds that
serious problems continue:
Last month, the [California Reinvestment Coalition] surveyed 55 foreclosure-avoidance counselors throughout the state. Collectively they serve thousands of borrowers every month. Almost all of the counselors, 94 percent, reported having worked with clients who'd lost their homes while under review for a modification. About half of the counselors reported this happened "often." This year's totals, which are due to be publicly released next week, are higher than those in the group's survey last year.
Federal banking regulators have put some important protections into place: banks will no longer be able to sell homes out from under owners who are being considered for mortgage modifications, and foreclosure will have to stop once a modification is approved. (Can you even believe that wasn't already a requirement?) But:
While those are necessary requirements, regulators took a "huge step backward" by not explicitly forbidding banks from pursuing foreclosure at all until a final decision has been made on a mortgage modification application, said Alys Cohen of the National Consumer Law Center.
The administration's mortgage modification program, which offers incentives to encourage modifications, has that requirement. But that program is voluntary for the banks and has been hobbled by lax oversight. What's more, over two-thirds of modifications occur outside of the program.
Federal regulators have the power to require all banks to make a decision on a modification application before moving to foreclose, but they've simply chosen not to.
Meanwhile, Kiel finds, homeowners are still having their homes sold as they go through the mortgage modification process, believing that they are doing what they need to do to save their homes. Neither is that the only way people continue to be victimized by mortgage companies. A Florida man lost all of his belongings when a mortgage company went to the wrong address; apparently that mistake isn't isolated, either.