A group of 20 senators led by Senators Claire McCaskill, Jack Reed and Chris Dodd wrote Treasury Secretary Timothy Geithner to urge him to address the roadblocks currently slowing down the Obama administration’s foreclosed housing prevention program.
The senators learned from a National Foreclosure Mitigation Counseling Program report that it takes about 45 days to 60 days before distressed borrowers get responses from their lenders to their applications for loan modifications under the federal foreclosed housing prevention initiative.
They are also concerned about the approximately one million borrowers whose adjustable mortgage loans are set to readjust in the next couple of years. Many of these borrowers are expected to lose their houses to foreclosure because the adjusted monthly payments would be beyond their capacities to pay.
Option ARMs enabled many borrowers during the housing boom to pay low monthly payments, enticing many others to buy homes beyond their income levels. Housing analysts contend that if homebuyers during the housing boom purchased the kind and size of house they originally planned to buy and not upgraded to a higher priced house, many of them would have not lost their homes to foreclosed housing inventories.
The senators urged Geithner to look into the case of homeowners who are having difficulty paying their loans, but who are not yet in default. These borrowers are not being accommodated by their lenders because they are not yet delinquent.
Another thing that the senators asked is whether the Treasury Department has considered requiring lenders to submit to the Treasury Department their plans related to staff training and information system upgrades that will facilitate responses to loan modification applications.
They also mentioned the recent enactment of the Helping Families Save Their Homes Act which aimed to expand the foreclosed housing program by providing more incentives to lenders.
At the beginning of their letter, the senators mentioned the failure of the Bush administration’s foreclosed housing prevention program and gave credit to the initial results of the Making Home Affordable program.
Among the 17 other senators who signed the letter to Geithner were Harry Reid, Chuck Schumer, Carl Levin, Frank Lautenberg, Joe Lieberman, Dianne Feinstein, Jeanne Shaheen and Russ Feingold.
The senators ended their letter by urging the Treasury Department to monitor closely the foreclosed housing prevention program and ensure that the program is fulfilling its goals and providing help to qualified American homeowners.
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