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re:  There are numerous reports stating that with no real monetary incentives, banks are doing very little to provide relief to homeowners in foreclosure.

St. Louis Foreclosures – What in the world is fueling this worsening home mortgage foreclosure epidemic?  There seems at the moment to be no intelligent explanation as to the miserable failure of this long awaited banking solution.  Especially when you take into consideration the enactment of several federal programs originally designed to strongly encourage loan modifications which to this date has failed to slow this triggered domino affect.

Our research department was reading a new report from the National Consumer Law Center (NCLC) which discloses that “mortgage servicers including many large banks have found it cheaper to foreclose on homeowners than to offer loan modifications that would benefit homeowners and investors.”

The results are terrifying.  Homeowners who would directly benefit from these loan modification programs and would ultimately keep them in their homes are not realizing this option and are being  ushered expeditiously into foreclosure.

This shocking new NCLC report also reveals that these servicers do not risk losing money on these foreclosures.  To the contrary, servicers in most cases actually make money on foreclosures whereas the unfortunate investors and homeowners generally are the losers in this home finance fiasco.

Diane E. Thompson, an attorney with NCLC, said,  “The country is in the midst of a foreclosure crisis of unprecedented proportions.  Millions of families have lost their homes and millions more are expected to lose their homes in the next few years. With home values plummeting and layoffs common, homeowners are crumbling under the weight of mortgages that were at best only marginally affordable when made.  One common sense solution to the foreclosure crisis is to modify the loan terms in more instances.  Foreclosures are a costly ordeal for the homeowner, the lender, and the community.  Yet they continue to outstrip loan modifications because servicers have no incentive to help
borrowers stay in their homes.”

Many of our readers are curious as to the identity of these “servicers.”  They are the banks  or financial companies who administer mortgage loans and usually collect mortgage payments.  Ironically, these banks and cohorts are involved in most day-to-day transactions for investments trusts that have bought huge amounts of portfolios from original lenders.

These are the same servicers that homeowners who are trying to save their home have to deal with on the phone or when writing letters.  Is it any surprise that the financial interests of these banks can have potential negative outcomes in regards to these desperate homeowners even to the point of ignoring their interests all together.

As grim as these reports are, it gets much worse.  The NCLC report continues:  “Loan modifications inevitably cost the servicer something.  A servicer deciding between a foreclosure and a loan modification faces the prospect of near certain loss if the loan is modified, and no penalty, but potential profit, if the home is foreclosed.”

And with no third-party oversight scrutinizing these banking decisions, it only makes sense that this encourages servicers to pursue foreclosures instead of using the effectiveness of loan modifications that would benefit the homeowner, the investor and our overall economy.

Reference material provided by:  www.consumerlaw.org