L.A. Foreclosure Help Necessary, Despite More Mortgage Forgiveness
Banks are reportedly making greater strides with regard to forgiving mortgage debt for California homeowners who are behind on their payments‚ per a multibillion-dollar settlement reached last year.
However‚ our foreclosure lawyers have also learned that more than half of the nearly $17 billion that marked California’s share of the mortgage settlement deal is still being funneled to efforts that actually get people OUT of their homes.
You may recall this was the agreement signed by the five largest mortgage servicing banks in the country and attorneys general from 49 states‚ including California. Now‚ a new report indicates that while there has been a marked increase in the number of principal reductions offered to struggling homeowners‚ the largest amount of that settlement money so far doled out has gone to short sales.
That means that rather than taking steps to keep people in their homes‚ the banks are making a more concerted effort to get them out. A principal reduction is an agreement whereby the banks will aid a borrower by agreeing to write down the total outstanding mortgage debt on the home. On the other hand‚ a short sale will grant the homeowner permission to sell their property for less than they owe (which is usually more in line with what the house is actually worth). Both options would cause the bank to take some type of financial hit‚ but short sales are usually seen as preferable to the bank‚ as it will receive a faster‚ more definite return on its investment.
For some buyers‚ this is the solution they are looking for. They simply want to rid themselves of the property and be done with it. However‚ those who want to keep their homes end up finding themselves in an uphill battle to try to win a principal reduction.
Since the settlement was inked last year‚ some 500‚000 homeowners have received some $46 billion in assistance from the five banks. That may seem like a lot‚ but remember‚ it was the shoddy practices of these banks that fueled the housing crisis flames in the first place. The settlement was to resolve numerous investigations into widespread (and substantiated) allegations that these banks had used forged and fraudulent paperwork‚ among other tactics‚ to foreclose on homes when the housing market imploded.
Prior to the agreement‚ many of those lenders were quote vocal about their opposition to writing down principal payments‚ saying that such action does little more than reward borrowers who had been delinquent.
However‚ consumer advocates prevailed in the implementation of a wide-scale principal reduction deal. It appears‚ though‚ that banks are still less than eager to extend principal reductions if they have other alternatives.
Officials with the Housing and Urban Development had previously estimated that the banks would provide roughly $35 billion in direct assistance to homeowners‚ though that figure was recently upped to an estimated $50 billion.
It appears we may have a long way to go to reach that goal. While 60 percent of the relief in the form of principal reductions‚ so far‚ it’s only accounted for less than a quarter of the relief – $11 billion of $46 billion.
In California‚ roughly $5 billion of the total $17 billion has gone toward first-mortgage principal reduction‚ while about $9 billion has gone to offering short sale options.
If you are facing foreclosure in Los Angeles‚ contact Nader‚ Naraghi & Woodcock to schedule your free consultation. Call (800) 568-0707.
Banks step up efforts to forgive mortgage debt in California‚ Feb. 22‚ 2013‚ By Alejandro Lazo and Jim Puzzanghera‚The Los Angeles Times