Banks Intensify Foreclosure Relief Programs
For so long now, mortgage lenders have resisted modifying the terms of their loans despite the rapid increase of foreclosures in the United States.
The unabated flow of foreclosed properties has caused the drastic decline of home prices across the country that could result to more homeowners losing their homes.
Housing Link, a research firm, said that about 30,000 foreclosures in Minnesota are expected this year, an increase from 6,466 in 2006.
Banks’ mortgage relief programs are based on streamlining and outreach principles. Financial institutions such as the Bank of America, J.P. Morgan Chase and Citigroup Inc. said that they will contact homeowners who are on the brink of default or in some form of foreclosure proceedings. They will then offer eligible homeowners to modify their loans with monthly payment scheme that is affordable.
The loan modification program is based on the U.S. Federal Deposit Insurance Corp.’s (FDIC) initiative on IndyMac bank.
It is reported that Sheila Bair, FDIC chairman, plans to propose the nationwide implementation of the foreclosure relief initiative under the U.S. government’s $700 billion bailout program for the financial industry.
The FDIC program involves sending of letters to IndyMac borrowers with proposals to reduce their payments to 38 percent or less of their incomes. Some offered modifications are longer loan terms and reduced interest rates.
To qualify for the loan modification, borrowers should submit documents for income verification.
However, “Inside Mortgage Finance” publisher Guy Cecala is doubtful if banks’ loan modification program will be effective. He notes that qualification guidelines vary for every program and the process could take some time.
Minnesota Home Ownership Center director Julie Gugin is concerned how banks will handle their loan modification programs.
She recommends for homeowners who are facing the threat of foreclosure to ask for a second opinion and to evaluate whether the program they are considering is really affordable and is the best option for them.
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