Foreclosure law: Foreclosed property prevention program suffers setbacks, falls well short of goals

Since the launching of the foreclosed property prevention program four months ago, only around 13,000home loans have been refinanced, far short of its admittedly lofty goal of helping 2 million homeowners.

It is not surprising that one of the main reasons for this underperformance is the failure of lenders and services to implement the policy goals. For example, under the program, refinancing should be made available to homeowners who owe up to 125 percent of their home value. Instead, Fannie Mae and Freddie Mac, have delayed buying these loans. As a result, lenders are not accepting the loan applications. Another example: while loans with insurance can be refinanced under the program, banks are refusing to accept applications from borrowers with mortgage insurance.

All of this points to a serious lack of accountability. The banks are simply refusing to follow the requirements of the program and offering no explanations for why they will not do so. In the case of loans with mortgage insurance, however, the answer appears pretty obvious.

It is also pretty clear that, unless banks are under far more pressure to negotiate with homeowners, they simply will not do so.