Are Banks Bypassing Poorer Homeowners When Distributing Mortgage Relief?
The goal of this spring's $26 billion mortgage settlement was to help victims of predatory lending practices. Now, it appears that banks may be using the funds to help themselves.
Back in April, the five biggest banks in the U.S. agreed to refinance mortgages and reduce principals on loans held by homeowners who are facing foreclosure because they are underwater or behind on payments.
Under the plan, the settlement would reduce the mortgage payments of as many as 2 million of America's most embattled borrowers.
But if a consumer advocacy group is correct in its suspicions, a big chunk of those funds are going to wealthy homeowners - not the low- and middle-income homeowners who need them the most.
According to the Maryland Consumer Rights Coalition, there's evidence that loan servicers are concentrating their efforts in affluent neighborhoods.
Wealthier homeowners are more likely to have expensive mortgages, and writing down these large mortgages can allow loan servicers to reach their required goal more quickly.
Furthermore, it appears that banks aren't offering the promised principal reduction modifications in neighborhoods with low and moderate incomes.
Yet borrowers with lower incomes were hit hardest by the careless lending standards that led to the housing bubble, and are therefore most in need.
Unfortunately, until monitors of the settlement start requiring demographic and geographic data, it's difficult to ensure at-risk homeowners will get the relief required to avoid foreclosure.
The good news is that there's still hope for troubled borrowers. Whether you are a victim of a predatory loan or simply of changing financial circumstances, bankruptcy is an often overlooked solution.
For those who qualify, Chapter 13 bankruptcy makes it possible to develop a manageable debt repayment plan without giving up secured debts, like homes and cars. Meanwhile, a legal action known as the automatic stay puts a stop to foreclosure while you make payments.
Many homeowners hold out hope that they'll be able to receive a mortgage modification. The sad truth is that lenders willing to perform modifications are few and far between - and those who do usually reduce interest, not principal, making little difference in monthly payments.
Why wait around for help that may never come - and risk losing your home and dignity?
The right bankruptcy plan has the power to lower the total amount you pay toward your debts each month - making it easier to pay the mortgage, the credit card bills, and all those other expenses in your life.
Make this the season you give thanks for the most important gift you can give yourself: a fresh start.
Our DebtStoppers bankruptcy lawyers are uniquely experienced in the nuances of bankruptcy law. If you think bankruptcy may be right for you, give us a call at 800-440-7235 or visit us online to sign up for a free one-on-one debt evaluation that could potentially change your life.
More Blog Entries:
Persistently Sluggish Economy Proves Most Painful for Members of Millennial Generation: November 13, 2012
More Foreclosures Can Mean More Foreclosure Rescue Scams: October 30, 2012
Additional Resources:
Maryland Consumer Group Says Mortgage Relief May Bypass Poorer Homeowners, by Margie Hyslop, Gazette.net
$26 Billion in Aid Given Under Mortgage Settlement, by Jim Puzzanghera, Chicago Tribune