The rescue plan may just wait for some months more before coming into full bloom.
It has been one month already since Pres. Obama signed the Homeowner Affordability and Stability Plan . It calls for the participation of mortgage servicers in modifying loans of troubled borrowers. But not everything’s in full gear. In a report by CNNMoney.com, “Servicers, however, are still updating their systems to process modification and refinancing applications. And they are waiting for clarification on a few points of the president’s plan. It could be weeks before borrowers learn whether they qualify for either program. Many have complained about being turned away by their servicers.”
There are reasons why such lackadaisical execution has taken place.
First, it takes time when careful borrower screening has to be performed. So far, only a few potential participants of the plan are asking borrowers to call them and discuss their loan solutions. To reach out to more qualified beneficiaries, the government has launched makingaffordable.gov. The site offers information on eligibility and loan counselors.
Second, most delinquent borrowers are afraid to call their mortgage servicers to confer about their condition. This may be due to the costs of paying a mortgage counselor, lack of confidence in the rescue plan or lack of interest in modifying their loans.
Third, there seems to be no general consensus as to when the plan should commence. What we have now is a wait and see attitude. We suppose that banks are still waiting for the formalization of the stress tests that the government has to administer. If they fail on this test, then there’s no reason why they should receive further support.
Fourth, some borrowers lack the necessary financial documents that are needed when applying for modification. Aside from tax returns, pay stubs must also be included when presenting the records.
Lastly, lawmakers are still pursuing other options for homeowners. There are calls for the abolition of the legislation’s provision of allowing bankruptcy judges from modifying home loans. Some are even against the entire plan, calling it as unfair to borrowers who remained prudent.