The capability of the Obama Administration’s loan modification program to stop bank foreclosure homes is being challenged by a public interest group based in St. Paul, Minnesota.
The Foreclosure Relief Law Project is planning to file a class action lawsuit in federal district court to stop the increasing number of bank foreclosure homes until such time that the federal government has addressed and repaired problems in its loan modification program.
The lawsuit will challenge the federal program that aims to give incentives to mortgage lenders to encourage them to modify troubled home loans. According to the group, the federal program which aims to stop the spread of bank foreclosure homes in the country, is not working as intended because in some cases, distressed homeowners are not receiving proper notices and do not have guaranteed rights to appeal the decisions.
Attorney Mark Ireland explained that the federal mortgage modification program lacks accountability and transparency. He pointed out that lenders are not required by the federal government to disclose to homeowners the reasons why their requests for loan modifications were denied.
Industry experts said that most often, the decision of lenders are buried in secrecy that homeowners, whose loan modification requests were denied, have no formal way of challenging these decisions.
The group noted that most of its concerns about the loan modification program of the federal government were mirrored in the U.S. Government Accountability Office’s (GAO) report about the $50 billion initiative, Home Affordable Modification Program.
The GAO report stated that the loan modification program has not yet established a comprehensive process to ensure that lending institutions evaluate whether homeowners who are at risk of defaulting may be eligible for the program.
According to Ireland, one of the lawsuit’s plaintiffs failed to get her mortgage service company’s response about whether she is qualified for the loan modification program. Another plaintiff lost his property to foreclosure despite his eligibility for the modification program.
The class action lawsuit is similar to cases filed in the 1980s which aimed to stop farm foreclosures until the federal government made sure that no violation of due process rights would happen when the program was administered.
The Minnesota lawsuit that aims to stop the spread of bank foreclosure homes named as defendants the Treasury Department, Fannie Mae, Freddie Mac and the Federal Housing Finance Agency.
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