As more homeowners slip into mortgage default on a home with a rapidly declining home value, the need for change is more pressing than ever before. The foreclosure crisis has plagued our nation long enough and it is time to solve our mortgage debt dilemma. While some actions have been taken by both federal and state governments, the breakdown between action and outcome sheds new light on the problem.
Gaps In The System
By law, mortgage lenders are required to do four things before a home can be entered into foreclosure: (1) attend a mediation, (2) provide proof that they own the note and are providing the loan, (3) make an attempt to renegotiate the terms of the loan and (4) act in good faith throughout the process. Through deeper investigation, it has been determined that there are two main areas of lender behavior that have played a role. First, there have been cases in which the lender sold the underwater mortgage note to investors and concealed the transaction during the mediation. Second, lenders haven’t been the most flexible or accommodating during mortgage modification negotiations.
Why are banks hesitant to negotiate? In short, lenders don’t want to lose money. If the lender can skate through the mediation with minimal effort or attempts to resolve the mortgage debts, many can recoup their lost money since the mortgage was insured to begin with. While some lenders avoid foreclosure at all costs, others play hard ball hoping to regain their money through mortgage insurance. It really all depends on the lender and the mortgage. Homeowners will find it difficult to secure a modification or stall the foreclosure process if they (a) live in a non-judicial foreclosure state and (b) have a federally insured mortgage. However, homeowners can request a mediation within the first 30 days after a default notice has been issued and work with a foreclosure attorney to maximize their chances of successfully resolving their mortgage debts.