Wednesday, May 16, 2007
Yara Zakharia, Esq.
Down-on-their luck mortgage debtors facing possible foreclosure will be pleased to learn that more and more lenders view their plight with indulgence and are extending a helping hand. In many mortgage lending institutions, the old attitude of forcing the homeowner out and leaving him on the street is being replaced with a new attitude placing emphasis on communication, negotiation, and cooperation. This new compassionate approach seems to be bearing fruit and is proving to be mutually-beneficial, since both parties stand to gain something: The mortgagee can avoid the high costs associated with a homeowner's default (typically $40,000 or more), and the debtor succeeds in paying off his bills without incurring penalties. This can only be good news, considering the rising number of foreclosures across the country.
Two major lending institutions that happen to be the largest banks in the United States-Citigroup and Bank of America- teamed-up to commit mortgage refinancing funds in the amount of $1 billion to protect 7,000 victims of predatory lending from losing their homes. The two lenders allocated the funds to Neighborhood Assistance Corporation of America, a non-profit advocacy organization, which plans to utilize the funds to counsel the at-risk, subprime borrowers and put them back on schedule vis-a-vis their mortgage. The advocacy group, in keeping with the two banks' proposed resolution, will aid the homeowners to refinance by way of a fixed-rate mortgage with a lower rate. Such a move by Citigroup and Bank of America consolidates their prior efforts in vouching for affordable house financing.
Similarly, a subsidiary of Bear Stearns (EMC Mortgage Corporation) is deploying a "loan modification team" which calls itself the "Mod Squad" to help mortgagees (lenders) in default get financially back on their feet again. The debt-counseling sessions are defying expectations, with a majority of the participants achieving debt elimination and a significant number working out alternative arrangements. In Dallas, for example, of the 75 participants who attended a one-day debt-counseling session sponsored and conducted by both the Consumer Credit Counseling of Greater Dallas and the "Mod Squad", a majority of the mortgage debtors left satisfied. A good number of the struggling Dallas mortgage owners at this session signed either a forbearance agreement, whereby the lending institution promises to suspend payments for a certain period time, or an agreement to pay off their balance within an agreed time frame, usually between 12 and 18 months. Another satisfactory solution involved entering into a loan modification agreement which set forth new terms and changed the status or type of their loans. For instance, some debtors changed their loans from an adjustable rate to a fixed rate. Others extended the length of their fixed rate home loans, which resulted in a considerable reduction of their monthly payment.
For good-paying borrowers and those who have fallen on hard times, this new trend that is sweeping the country is the silver lining in their financial clouds. Such a novel approach to tackling mortgage default is very promising indeed and will continue to gain ground, for it is a win-win situation for both the lender and the debtor. As they say out in the real world, it's all in the attitude!
