By Norma Garcia
Just when you thought it couldn’t get any worse, a new study by the California Reinvestment Committee (CRC) found that more than a year since it began, the nation’s primary foreclosure prevention policy, HAMP, is failing California’s homeowners. The culprit, according the CRC findings, is that mortgage servicers are making a lot of mistakes and are not complying with the HAMP rules. The unfortunate result is that homeowners are being foreclosed on while in the middle of applying for loan workouts or trial modifications.
Go to CRC’s site to download the new Chasm Between Words and Deeds VI study: http://www.calreinvest.org/
The survey includes responses from 53 California mortgage counselors, representing 40 agencies, with client caseloads of more than 14,000 homeowners in May and June of 2010. An astounding 60% of the counselors surveyed reported that they have had clients who suffered foreclosure while in the middle of negotiating with their loan servicer. The counselors are also reporting in high numbers that their clients are having trouble getting their servicers to convert trial loan modifications to permanent status.

CRC’s Associate Director, Kevin Stein, is calling for an overhaul of HAMP to create consequences for noncompliance. Participation in HAMP and compliance with HAMP rules is entirely voluntary, and the disappointing results thus far expose the ineffectiveness of this structure. We support the CRC in their call to overhaul HAMP.

All is not without hope, however. Currently the California Legislature is considering SB 1275 (Leno Steinberg) which will help prevent unnecessary foreclosures in California.
This bill provides rights and remedies for consumers working their way through the foreclosure process and provides that a lender cannot begin the foreclosure process until it has determined whether or not a borrower is eligible for a loan modification. The goal of SB 1275 is to insure that those borrowers who are eligible for loan modifications obtain decisions about their eligibility in a timely manner.

Without SB 1275, Californian’s seeking to take advantage of foreclosure prevention programs are destined for more of the same as what is reported in CRC’s new report. It’s time for the Legislature and the Governor to do something, and SB 1275 is a viable and well crafted solution. As SB 1275’s author Senator Mark Leno recently said, “Clearly the status quo is not sufficient for Californians who are struggling to save their homes and can qualify for a mortgage modification that would spare their families much pain and anguish. SB 1275 is the appropriate solution.” We couldn’t agree more.

Click here for a PDF of SB 1275