With Increasing Foreclosures, US Housing Industry in Deep Crisis

The American economy is going through one of its most challenging phases. Unemployment is at its peak and as people lose jobs they are faltering on mortgage payments. Hence, banks are taking over the properties and foreclosure homes have become very common. The housing industry in the US is in the grip of a deep financial crisis.

The administration has now come up with a housing rescue plan. It hopes to put the industry on the right track. Now 25 executives of a mortgage company have been asked to help borrowers whose houses are running the risk of foreclosure. There has been a verbal agreement between government officials and the executives that there will be 500,000 mortgage modifications in the next three months. There have been concerns that the government may not be able to help up to 4 million borrowers that it had originally planned to.

So far, only 200,000 borrowers had approached for loan modification trial. The mortgage companies had offered to modify the loans of nearly 370,000 people. In a meeting between the government officials and the mortgage companies, it has been decided that the program should be put on the fast track

Everyone, right from counselors to activist groups, feel that the process is confusing. Counselors are saying that borrowers are being charged upfront. They are also being given inaccurate information about the housing plan. The decision about loan modification is being kept a secret and there is no way that one can challenge it. The process is painful for those who are getting the loan modification.

Take, for instance, 41-year old Alfred Robinson, who got his loan modified after much struggle. Three months ago he was told that his income was very high and that he cannot qualify for a loan. Then he was offered a loan revision that was not all favorable by Washington Mutual. Then after the Obama plan came into effect, his monthly payment was lowered by about 100 to $950.

A reason for this slow progress is that the loan servicers had to train many employees. The loans had often been sold as securities to borrowers. The securities, of course, have certain rules about revision. What’s worse, many servicers did not have any idea that they would have to deal with such a huge problem in bad loans. According to the plan, servicers can also keep $4,500 for every loan that is modified by them.

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