New Study Says Equipping Mortgage Servicers Better Could Have Prevented 800K Foreclosures

We spent much of last week discussing options for Illinois homeowners in need of foreclosure help, and on September 20, 2012, the Chicago Tribune reported that 800,000 foreclosures "could have been prevented if large mortgage servicers had been better equipped to deal with the crush of troubled homeowners who needed help." These were the findings of the Treasury Department's latest report on the $75 billion Home Affordable Modification Program (HAMP). The study found "more than 1 million temporary and permanent modifications have failed since the administration kicked off its program shortly after President Barack Obama took office in 2009," according to the Tribune.

However, the news program "Dan Rather Reports" examined the effects HAMP was having in the December 2010 episode above, entitled "Home Loans From Hell." Rather began the program by noting that 14 percent of homeowners in the country were delinquent on their mortgages at the time the show aired, and describing the robo-signing scandal as "just the tip of the iceberg."

"A little-reported and little-understood aspect to the foreclosure crisis ... is that foreclosure is in fact a lucrative profit center for the servicers who are making millions off a laundry list of fees," Rather said. "The banks who service home loans dispute this, but we've been talking to homeowners across the country who say their servicers pushed them into foreclosure instead of working with them to modify their loans."

The Tribune reported that researchers in the Treasury Department's latest report found "great inconsistency in how large servicers responded to the program." Some large servicers offered half as many loan modifications as other companies while other "more successful servicers" that renegotiated mortgages had programs and trained staff in place long before HAMP began, according to the Tribune.

"This industry is mainly about accepting checks," University of Chicago Booth School of Business assistant professor Amit Seru told the Tribune. "One wasn’t expected to be dealing with so many distressed borrowers."

If you are facing foreclosure, you should know that filing Chapter 7 or Chapter 13 bankruptcy can offer you real relief that could help you discharge much of your unsecured debt and may allow you to get current on your mortgage. Our Chicago bankruptcy lawyers can determine whether Chapter 7 or Chapter 13 is the better option for you and your family when you complete the form on this page or contact our firm at (866) 930-7482.

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