Foreclosure chart of the day

By Felix Salmon
July 29, 2009
Center for Responsible Lending:

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The chart comes from the Center for Responsible Lending:

loan-mod-chart.jpg

According to Congressional testimony from CRL director Keith Ernst, the 1.5 million homes which have already been lost to foreclosure are just the tip of the iceberg compared to the 13 million total foreclosures expected over the five years from end-08 to 2014. He adds:

Many industry interests object to any rules governing lending, threatening that they won’t make loans if the rules are too strong from their perspective. Yet it is the absence of substantive and effective regulation that has managed to lock down the flow of credit beyond anyone’s wildest dreams. For years, mortgage bankers told Congress that their subprime and exotic mortgages were not dangerous and regulators not only turned a blind eye, but aggressively preempted state laws that sought to rein in some of the worst subprime lending. Then, after the mortgages started to go bad, lenders advised that the damage would be easily contained. As the global economy lies battered today with credit markets flagging, any new request to operate without basic rules of the road is more than indefensible; it’s appalling.

He also has a relatively simple idea which I think would help a lot in getting servicers to actually implement the loan modifications they say they’re committed to doing:

One way to help with the various concerns just listed is to create a mediation program that would require servicers to sit down face-to-face with borrowers to evaluate them for loan modification eligibility. Similar programs are at work in several jurisdictions across the country, and they can be very helpful to ensure that homeowners get a fair hearing and that all decisions are made in a fair and transparent way.

I fear that Congress is beginning to get reform fatigue, after so many attempted solutions have failed. But that’s no reason to stop trying new things — in fact, it’s a good reason to try even harder.

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