Just how many troubled homeowners are being helped by their lenders in solving foreclosure problems? Estimates say that a mere 1 in every 5 homeowners in the Valley, one of the hardest hit areas, is receiving some sort of support from their mortgage companies or banks.
According to Arizona Department of Housing Director Fred Karnas, lenders may presently be exerting more effort to help struggling homeowners, but the measures are still not enough to relevantly aid in foreclosure concerns.
Anthony Sanders from ASU’s WP Carey School and Business agrees. He says that extending payback periods or cutting interest rates to reduce monthly mortgage payments does not work. In fact, he contends that 60 percent of these homeowners will default again. Sander, a finance professor, is also an advisor to Congress and the Treasury Department regarding mortgage bailouts.
Another problem, says Karnas and Sanders is the lack of bank staff to answer the waves of inquiries coming from homeowners facing foreclosure. Some of these staffers even give contradicting advice.
However, Mary Jane Morgan, the spokeswoman for JP Morgan Chase, says that the bank is employing 300 people and opening 24 mortgage service centers across the country for foreclosure counseling. She admits that economic conditions had not been anticipated to go into a downturn so rapidly. Aside from this, a slew of other problems were experienced by the bank such as the acquisition of Washington Manual. This came right after the collapse of one of the larger subprime mortgage issuers, Wamu, in September.
With foreclosures increasing and showing no signs of abetting soon, Sanders says that banks should take drastic measures and reduce the value of home loans.
However, homeowners who make their payments on time might protest at the thought of rescuing a neighbor from bad loans. But since foreclosures have a widespread effect and lower home values in the neighborhood, a bailout is inevitable. Sanders also said that lenders and investors should step up and shoulder the costs.
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