Coakley: Foreclosure Relief Program Has Failed
State Attorney General Martha Coakley has submitted testimony to the U.S. House Financial Services Committee blasting what she calls the mortgage industry's lack of action on loan modifications.
Coakley is scheduled to testify before the committee, which is chaired by U.S. Rep. Barney Frank, D-Mass., tomorrow regarding the state's investigation into auction-rate securities fraud.
In the testimony submitted to the committee, Coakley argues that the spiking number of home loan foreclosures in Massachusetts is "due in large measure to unsound and predatory lending practices."
However, when given the chance to "do the right thing" and restructure those loans to make them manageable for homeowners in trouble, the mortgage industry has taken a pass, she says.
"Regrettably, this approach has not been successful. Indeed, the voluntary approach to loan modification has failed." The number of loan modifications that have gone through is insignificant, Coakley says, and those that do go through do not "decrease debt or promote affordability." They simply "kick the can down the road," and temporarily put off foreclosure rather than rearrange predatory loans to make them more "sustainable" for homeowners.
Coakley says Bank of America, Citigroup and Wells Fargo initially agreed to help the state formulate a loan modification system, but have since abandoned the effort. "We are frustrated by the chorus of agreement but absence of meaningful action," Coakley says. Coakley supports the federal Hope For Homeowners Act, but says that the state will nevertheless increase its litigation, legislative and regulatory efforts to crack down on predatory lenders that refuse to modify unsustainable mortgages.
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