Statement of Michael Calhoun, President
Center for Responsible Lending
"The Obama administration's latest adjustments to its nine-month-old foreclosure prevention program do little but highlight the continued failure of lenders' voluntary efforts to stop the foreclosure crisis. The number of Americans in foreclosure continues to rise dramatically, with up to three million new foreclosure starts this year alone, a trend that undermines economic recovery.
To address the foreclosure crisis that's at the root of the current slump will require more comprehensive action. Specifically, Congress must:
- Require loan companies stop foreclosure proceedings while loan modifications are under consideration.
- Require loan companies to work with homeowners in distress. Recognizing that the current voluntary system has failed, the House and Senate currently are considering bills to make loss mitigation efforts mandatory.
- Create a low-cost, short-term loan program for unemployed homeowners who have no other option for keeping current on their mortgage.
- Require Treasury to go beyond selectively publishing loan servicing data and make all data available so the public—including taxpayers—can better evaluate the program and the efforts of individual companies.
- Allow stressed homeowners the option of lowering their principal mortgage balance, including through bankruptcy courts.
Lenders have insisted for almost three years now that they will voluntarily address the foreclosure crisis, but the record shows they've made too few long-term modifications. The HAMP program the administration introduced last spring was an improvement, but it was originally designed as just one part of the solution, along with allowing homeowners to seek loan modifications through the existing court system.
Without mandatory requirements and fully disclosed results, foreclosure prevention efforts—no matter how well-intentioned—will not succeed. And the cost of failure will be borne by not just struggling homeowners, but by their neighbors, communities, and the larger economy."
For more information: Kathleen Day at (202) 349-1871 or kathleen.day@responsiblelending.org; Ginna Green at (510) 379-5513 or ginna.green@responsiblelending.org; or Charlene Crowell at (919) 313-8523 or charlene.crowell@responsiblelending.org.