HUD Secretary Tells Panel: Housing Crisis Improving, Not Over

The Record ( — Monday, September 21, 2009

The Record

HACKENSACK — The U.S. government's home-loan modification programs have made progress but continue to be bogged down by loan-servicers' difficulties in processing applications, according to testimony Monday at a Senate subcommittee field hearing in Hackensack.

New Jersey Sen. Robert Menendez, chairman of the subcommittee on housing transportation and community development, called the hearing to explore the impact of high foreclosure rates in New Jersey and to look at what can be done to keep more people in their homes. Many homeowners' requests to loan servicers for modifications continue to fall into "black holes," he said.

Millions of Americans may lose their homes within the next few years, the fallout from lax lending standards, the bursting of a housing bubble, and growing unemployment. More than 31,000 foreclosures were filed in New Jersey this year through the end of June and thousands more were added in July and August, making New Jersey the 11th worst state for foreclosures.

Menendez said the full impact of the crisis "has not yet been felt."

Shaun Donovan, secretary of the Department of Housing and Urban Development, the New Jersey Attorney General Anne Milgram, a state housing official, consumer advocates, a mortgage servicer, and a Springfield homeowner all testified at the hearing held at the Bergen County Administration Building.

Donovan said 56 loan servicers nationwide, representing 85 percent of the market, have signed contracts with the Obama administration to participate in the Making Home Affordable program, which started in March. The servicers have extended more than 571,000 loan modification offers and about 360,000 borrowers have entered the 90-day loan modification trial period, required before a modification agreement becomes permanent.

"We believe we are ahead of schedule to meet the Nov. 1 deadline of 500,000 homeowners by Nov. 1," he said.

"The program has achieved clear success in a relatively short time period, and there are indications that the housing market is stabilizing with home price declines slowing," he said.

But more needs to be done as second mortgages, credit card and other debt have been stumbling blocks in getting homeowners qualified for loan modifications, he said.

Attorney General Milgram said a state foreclosure-prevention program has helped more than 500 homeowners keep their homes this year. The mandatory mediation program provides free counseling and legal services for homeowners facing foreclosure who qualify.

Phyllis Salowe-Kaye, executive director of New Jersey Citizen Action, which provides housing advice, said her loan counselors have for more than two years been dealing "almost exclusively" with "homeowners facing foreclosure due to loss of job, divorce, illness, and/or from being victimized by predatory lending, toxic mortgages and fraud schemes."

Affordable housing advocate Mario Vargas, executive director of the Puerto Rican Action Board in New Brunswick, complained that many loan modifications are destined to fall back into foreclosure because the monthly payments increase. He urged Menendez to get his fellow lawmakers to prohibit such modifications. He also said many modification agreements get derailed because investors who own bonds backed by loans will not agree to accept reduced payments.

Bryon Bolton, senior vice president for loss mitigation at CitiMortgage Inc., said the Citigroup subsidiary's loss-mitigation programs kept more than 625,000 borrowers in their homes since the beginning of 2007 and that the company has hired 1,400 since the first quarter to handle loan-loss mitigation and modification requests.

Edward J. Heaton, a homeowner in Springfield, said the government needs to "put more teeth in federal laws" to get loan servicers to be more responsive. Heaton, who gets around in a wheelchair, said he lost his job in 2006 and took two part-time jobs at Comcast and Time Warner Cable. Early this year he lost the Comcast job when it was relocated to Philadelphia.

He and his wife have been trying to modify their loan for more than six months, and he said the servicer has given them the run-around.

"Treasury has the power to fine servicers," Menendez said. "The only problem is they haven't fined anybody yet."

Top Top | NJCA in the News | NJCA Homepage