The front page of today’s Wall Street Journal featured a touching article about the difficulty of getting a mortgage modification. We have stated the facts in this piece many times, including the crucial fact that 9% of 45 million American homeowners were delinquent on mortgage payments in the first quarter of 2009. Yet, only about 500,000 loans have been modified thus far, leaving at least 3.5 million people without a much needed modification. It has also been stated often that a modification is hard to come by. While the article goes into more specifics, the stories of piles of paperwork and miles of red tape are already widespread.
Given what is clearly a problem, I wonder if there is not some solution that would do a better job of solving these issues. If a customer has applied for a mortgage modification, is getting stuck in red tape, and there is already a glut of houses on the market, why not order a temporary halt to the foreclosure until the situation can be resolved? It is hard to believe that it is a best practice to penalize a customer for the bureacracy surrounding the new programs that Obama has created (as well as existing ones that are seeing a surge of interest).
As the article pointed out, there are many parties with stakes in a foreclosure. The lenders and investors care about the outcome of an overdue loan as well. However, harried bankers and servicers need to be given the time to adequately resolve these claims. Unfortunately, as more and more homeowners head into foreclosure, time appears to be sorely lacking.