"Obama admin steps up foreclosure prevention efforts"

[Clio the Leo]

Obama admin steps up foreclosure prevention efforts
By Corbett B. Daly
WASHINGTON | Tue Jan 18, 2011 1:44pm EST

(Reuters) - The Obama administration on Tuesday stepped up efforts to make it easier for struggling homeowners to renegotiate the terms of their mortgage, although it could be more than a year before such efforts pay off.

The way mortgage servicers -- firms that collect loan payments on behalf of a loan's owner -- are paid is fundamentally "broken and should be fixed," Treasury Secretary Timothy Geithner and Housing and Urban Development Secretary Shaun Donovan said in a joint statement.

Geithner and Donovan's comments followed news the regulator for mortgage finance giants Fannie Mae and Freddie Mac said it would consider new ways for mortgage servicers to be compensated in order to make it easier to modify loan terms for struggling homeowners.

The existing system for mortgage servicers provides little flexibility to change easily the terms of the loan if a borrower falls behind on monthly payments.

"The current model has not motivated mortgage servicers to invest the time, effort and resources needed to fully explore all options to help delinquent borrowers avoid foreclosure," Donovan and Geithner said, echoing the Federal Housing Finance Agency.

As it now stands, servicers are paid a monthly fee for collecting payments on performing loans. When those loans go bad, the monthly fees decline, giving the servicer little incentive to make an effort to communicate with the borrower, let alone work out new terms for the borrower, a time-consuming and costly process.

Critics have said this compensation structure is a key reason the number of loans modified for struggling borrowers has been relatively modest.

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http://www.reuters.com/article/idUSTRE70C0YD20110118?feedType=RSS&feedName=politicsNews&WT.tsrc=Social%20Media&WT.z_smid=twtr-ReutersPolitics&WT.z_smid_dest=Twitter

[Hell Hath No Fury]

1. Uh....

A little too late for the three folks I know who had to go into foreclosure and lost their homes last year. :( The program as initially put out there helped FAR too few homeowners.

On edit: I wanted to add that all three sought a loan modification and all three were turned down.

[louis-t]

2. Because the banks don't want to participate.

They've said so. Apparently, the government can't force them to comply.