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Now They're Sending in SWAT Teams?

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The latest chapter in the Obama administration's attempts to make lenders modify mortgages is to send SWAT teams – no, I'm not kidding, really, SWAT teams – into the call centers of major lenders to try to ensure that they follow the proper procedures and actually modify loans. Seriously, wouldn't it be a whole lot easier just to pass cramdown and allow bankruptcy judges to modify mortgages than to try to sweet talk, bribe or otherwise convince bankers to do it on their own?

Because they're not. Making Homes Affordable, the program implemented by the government last May, is designed to encourage banks to modify the loans of homeowners who are having trouble making mortgage payments. Mortgage companies are reluctant to do that, however: they make more money in interest and fees when a mortgage goes into foreclosure, than they make from the government when they successfully modify it. The government had hoped to have 3-4 million mortgages modified by the end of last year. As of mid December, the count was at 750,000 – the vast majority of those were still in the trial stages.

The news reports of lenders dragging their feet are backed up with anecdotal evidence from homeowners, who report that they call the lenders over and over, file and refile the same documents, and then call back, only to be told that no one knows anything about their case. Lenders counter that people don't send them the requested documents. Really? Desperate homeowner, one last shot at keeping their home, and they can't be bothered to fax some papers? The lender argument is a little hard to believe.

Hence, the SWAT teams. These are teams of three people, sent into the call centers of the seven largest loan servicers to make sure that the bank representatives are giving accurate information, filing forms properly, etc. Experts are not impressed – many say the initiative is unlikely to work. Some have called for putting permanent government observers in the call centers. They note that private insurers already have their people inside the call center, to help prevent the loans they've insured from going into foreclosure.

Unfortunately, neither temporary nor permanent government observers in the call centers seems likely to work. This is another initiative – like the 'foreclosure hall of shame' that was supposed to embarrass the lenders into modifying loans – that the banks will evade and ignore until the administration acknowledges it isn't working and moves on to something else. The fact is, lenders aren't going to modify substantial numbers of mortgages until they are forced to. Unless an initiative like cramdown is passed, which takes the decision to modify or not and how much out of the bank's hands and gives it to a neutral party, foreclosures will continue to rise.

Fortunately, homeowners finding it difficult to pay their mortgage may have another option to save their home: bankruptcy. Your bankruptcy attorney will return your phone calls, keep your files organized, and not make you fax documents four or five times. In addition, he or she will help you map out a plan that will lead you to financial freedom. The Obama administration may sincerely want to help homeowners. But as long as they expect bankers to do it out of the kindness of their hearts, you're probable better off filing for bankruptcy.

Brought to you by the Law Offices of John T. Orcutt. Providing North Carolina homeowners real foreclosure relief since 1995. Is your lender not working with you? Call today and find out how a bankruptcy can save your home. 1-888-234-4181. Convenient offices in Raleigh, Durham, Fayetteville, and Wilson.

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