Digital News Report – There have been numerous problems with the government loan modification program, but Democrat lawmakers say the program can be fixed.
One common problem is that servicers do not make trial modifications permanent. The servicers, many times banks, make more money filing paperwork to foreclose than they would make if the loan modification became permanent.
Banks typically sell the loan to investors and act only as a servicer. They collect the monthly payments, take a fee and give the rest to the investor. Banks still act as an intermediary between the investor and the homeowner.
Sen. Sheldon Whitehouse (D-Rhode Island) has introduced legislation to fix the problem. The Limiting Investor and Homeowner Loss in Foreclosure Act (S. 222) is meant to bring homeowner together with the note holder. Last month the bill was placed on the legislative calendar.
Whitehouse says the bill will authorize bankruptcy judges to establish a loss mitigation program. The goal will be to bring the debtor and the note holder together to negotiate an alternative to foreclosure.
“Servicers too often act in their own fee-driven interests and not in the interests of the investors who actually hold the mortgages,” Whitehouse said.
The bill has three cosponsors, including:
Sen Blumenthal, Richard [CT] – 2/17/2011
Sen Franken, Al [MN] – 4/4/2011
Sen Leahy, Patrick J. [VT] – 3/3/2011
By Tina Brown
Digital News Reporter
Photo: Sen. Sheldon Whitehouse