Big banks bear a lot of responsibility for the foreclosure crisis of recent years.
In fact, they’ve admitted it. Five of the nation’s largest banks entered into a settlement with the federal governments and 49 states earlier this year. The banks agreed to pay $25 billion as compensation for foreclosures that often did not meet legal requirements.
How many homeowners were affected? A recent study tried to document the damage and came up with an estimate of the number of people who wrongly pushed into foreclosure: 800,000.
Many of these people did not realize in time that bankruptcy can provide an automatic stay against foreclosure proceedings. Some of them may have tried to make use of government programs that were never really very effective at helping homeowners behind on their mortgage payments keep their homes.
The study was done by researchers at several leading government and academic institutions, including the Office of the Comptroller of the Currency. The specific focus of the study was to measure the effectiveness of the Home Affordable Modification Program, known as HAMP.
The authors found that some banks were much better than others at working with homeowners on modification of mortgage loans. In particular, the authors concluded that banks that did a better job of working with homeowners were the banks with more staff trained to doing so.
Or, put another way, banks that did not have enough staff in place generally were not as willing to work with homeowners on loan modification.
As a result, HAMP program delivered only about 1.2 million mortgage modifications nationally. If the banks had been ready to cooperate, the study’s authors calculated that the program could have produced 2 million modifications.
Regardless of what your bank does, however, keep in mind that bankruptcy is often a sound strategy for keeping your house out of foreclosure.
Source: “Banks’ Disorganization Pushed 800,000 Homeowners Into Unnecessary Foreclosure: ProPublica,” Huffington Post / ProPublica, Paul Kiel, 9-11-12
Our firm handles situations similar to those discussed in this post. To learn more about our practice, please visit our San Antonio home foreclosure page.