Editorial: Speed up foreclosure protection
Photo credit: AP File Photo | Foreclosure signs, a common marker of this recession. (April 2008)
About a year into the crisis touched off by home mortgage woes, federal efforts to help homeowners avoid foreclosure have been underwhelming. The two major initiatives -- Making Home Affordable and Hope for Homeowners -- share one key element. Each relies on lenders to voluntarily modify or refinance loans. That hasn't worked very well.
Unless lenders do more to help people stay in their homes, Congress should revisit proposals to authorize bankruptcy judges to modify mortgages on primary residences, as they do on commercial property.
The goal isn't more bankruptcies, but fewer foreclosures. If lenders faced the prospect of judges changing the terms of existing mortgages, the desire to retain control by helping borrowers avoid bankruptcy would be a powerful incentive for lenders to modify loans.
Absent that stick, foreclosure filings have continued to mount. There were 1.5 million in the first six months of this year, including 24,210 in the state and 6,274 on Long Island.
Since Making Home Affordable was launched in March, 235,247 trial modifications have been initiated, a small fraction of the 2.7 million eligible loans. But the spectacular failure is Hope for Homeowners.
Started in October to move delinquent borrowers into FHA-insured mortgages, it has produced exactly one refinanced loan. It will be relaunched soon with more user-friendly terms.
User-friendly is good, but Washington should get tough with recalcitrant lenders. hN
