CALPIRG Blog

Loan servicers are taking their sweet time figuring out how to deal with the flood of troubled borrowers in need of a loan modification.  According to the most recent treasury department numbers, only 1 in 5 eligible borrowers have successfully navigated the labyrinth of automated phone menus and online forms necessary to secure a modification. 

Frankly, the lollygagging is unacceptable.  In the majority of cases, modification is a better deal for the banks as well as the borrowers.  Foreclosure is expensive, and generally ends up reducing the value of the home to the current market value.  Despite this there is still an astounding amount of foot dragging going on. 

On the bright side, the Obama administration, as well as several states, have taken notice and are doing something about it.  Some states have created programs that provide banks and borrowers with a mediator to hash out an equitable solution for both parties.  The Obama administration has taken a more direct approach by dangling the threat of fines in front of lenders who don’t get their act together.  Here is an LA Times story on Obama's plan. 

The economic collapse started with the housing sector, and so will the economic recovery.  The sooner we reduce the flood of foreclosures the sooner we can start making a dent in the number of houses sitting empty, weighing down property values across the board.