Despite Subsidies, Banks Are Not Gung-Ho On Restructuring Mortgages

Funny that. Banks expect borrowers to live up to the terms they signed up for.

Politicians want votes and they've instituted all sorts of programs to encourage lenders to restructure a lot of mortgages that might otherwise fall into foreclosure.

Banks don't have a lot of incentive to modify mortgages. They believe in the sacredness of contracts. They're getting bludgeoned however by the news media and by politicians to go along with the program.

Countless people have been turned down for mortgage modification because of bank errors such as typos.

The Washington Post reports:

Though her story is striking, Gooch is far from alone in her problems with the Obama administration's loan modification program, which provides federal subsidies to encourage lenders to renegotiate rather than foreclose on certain borrowers. Seven months in, many qualified applicants are being rejected, often through bank errors, with no avenue of appeal. Until this month, lenders didn't even have to tell them why.

"If the servicer messes up, even by accident, there is no meaningful way to complain, no real appeals process, no viable ombudsman to consider," said Kevin Stein, associate director of the California Reinvestment Coalition in San Francisco. "Most importantly, there are no consequences to the banks for failure to do what they have promised to do."

Meanwhile, foreclosures continue to rise with each month's report of new job layoffs and each new wave of adjustable-rate mortgages resetting to higher payments.

Foreclosure filings are on a pace to hit about 3.5 million this year, up from more than 2.3 million last year, according to a Thursday report by RealtyTrac, which compiles data for most U.S. counties.