In a report on HousingWire.com, it was mentioned the FDIC Chairman Shelia Bair felt certain procedures in the home loan modification plan may need to be addressed. While the address of the FDIC Chairman were more far-reaching than simply to address problems in the modification program, a topic was breached which many homeowners have also presented to be a problem with the modification program as a whole.
The problem many mortgage servicers, investors, and homeowners feel needs to be addressed is the requirement that a home loan modification, or general restructuring of a mortgage, only takes place after delinquency on the part of a homeowner is present. Again, this was not the main issue in the speech by Ms. Bair, but there have been complaints by homeowners who have entered into the home loan modification process that they are denied assistance until they are behind on their monthly mortgage payments.
Many believe that this has caused a great deal of problems to arise not only for homeowners but mortgage servicers as well, seeing as how some homeowners who may have been able to find a preemptive mortgage assistance option had to wait until they either got into a financial position which did not allow them to make their mortgage payment or willingly do damage to their credit by missing their mortgage payment until they were classified as delinquent.
Some homeowners went through this process, during which they simply stopped making their mortgage payment, but may have had trouble qualifying for a home loan modification and left themselves in a bad financial position as a result. While there have been a slew of problems associated with home loan modifications on the part of servicers, homeowners, and with qualifications in general, many feel that waiting until the homeowner has reached a state of delinquency has caused more problems than it has prevented.
While there have been increases in the number of permanent modifications which have been seen in the federal modification program and reports indicate that proprietary, in-house modifications directly from servicers are even outpacing the federal modification program, homeowners who have had to wait for their mortgage situation to become dire often feel that had a more affordable mortgage payment opportunity been afforded to them earlier, less financial troubles may have arisen.
There has even been some who feel that if servicers are allowed to take more preventative measures to assist homeowners facing mortgage payment troubles, a reduction in foreclosures may result. While there are cases where homeowners may have been, or could have been, offered a modification before becoming delinquent but may have still lost their home to foreclosure due to factors like unemployment, there are those who believe that issues like this may need to be addressed in the coming months if employment opportunities do not become more available and homeowners continue to fall into delinquency and subsequently foreclosure.