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The federal government has set up a system of free counselors to help people avoid foreclosures. Names of approved counseling organizations fare available at the Hope website www.995HOPE.com or by calling the HOPE HOTLINE at 888-995-4673. These counselors have been helped by cash incentives for mortgage holders to modify loans which have been provided by the the Obama administration.
None of this has worked very well. Only a few hundred thousand of a protential four million mortgages have been modified. One reason is that the mortgage servicing companies do not have enough staff to handle the requests. Another is that the servicing companies do not have full control since the mortgages are usually owned by several different companies that bought Collateralized Debt Obligations.
But the most important problem is that the program requires that the cost of the modified mortgage cannot be more than 31% of monthly income. Often the modifications required to get the bill down to that amount are unacceptable to the mortgage holder. When there is no income, or only unemployment income, the situation becomes impossible.
The Congress defeated a bill that would have allowed bankruptcy courts to "cram down" principle on these mortgages, solving some of the problems, and since that defeat the administration has been creating alternatives. Right now, "forbearance" is under consideration. This would postpone payments until the mortgage holder gets a job, but the payments not made would just be added to the principle, making it even harder to reach the 31%.
Written by Jack Edmonston
www.askjackaboutdebt.com
Posted June 27th, 2009 by Armen Hareyan
