Government and lenders see foreclosure prevention efforts failing. Now for plan B. Or are we on plan H now?

WaPo reports that many banks (and even Fannie and Freddie) are learning that foreclosure prevention efforts aren’t reaching as many people as hoped, and are developing foreclosure alternatives.

Citigroup, for instance, plans to announce a pilot program on Thursday that would allow delinquent borrowers who don’t qualify for or decline mortgage relief the opportunity to stay in their homes without making payments for up to six months before turning over the keys, in return for keeping the property in good condition. The bank estimates that up to 20,000 borrowers in Texas, Florida, Illinois, Michigan, New Jersey and Ohio could be eligible.

1.9 million foreclosures are predicted this year. These alternatives are being touted as a way to make the process more orderly and to avoid a glut of foreclosures down the road.

Do you buy it?

Every one of these foreclosure fixes seems to either 1) have unintended consequences or 2) fail to reach as many people as expected.

In the same vein, Rutgers University economics professor Eugene White opines in yesterday’s Wall Street Journal (subscription required) that these foreclosure rescue efforts actually harm many of the people they are supposed to help. Find out why he thinks that the poor are better off renting.

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2 Responses to Government and lenders see foreclosure prevention efforts failing. Now for plan B. Or are we on plan H now?

  1. Lenn Harley says:

    The Citigroup plan isn’t foreclosure prevention. It’s foreclosure delay.

    The only true foreclosure prevention never happened. Bank would have had to write down mortgaga balances. They didn’t. That would have been a better use of TARP money than the hand-outs designed by the Fed. and Treasury.

    Now that the money is gone, government compensated write-downs are not an option.

    With the boot of tenancy on the necks of more American families, they’ll be more inclined to vote for more government expansion for services.

    Mortgage balance write-downs and elimination of negative equity would put 20,000,000 American families back in the economy.

  2. Brigitte Powell says:

    Foreclosure prevention? HA! Not so in the case of Bank of America or USAA. I have one of each and in both cases the lender did not call the owner back to offer assistance until THEY decided to threaten foreclosure, or money management classes, and in the case of USAA they suggested the Owner list the house for sale (when they already had the listing agreement and the short sale application in front of them). Not only that, I got not just one call but two calls within two weeks, from the negotiator in one of these cases who insisted they were looking at an offer AND argued with me when I told them there was no offer (I would certainly know if I had an offer on my listing). It almost got ugly….and I just started laughing because it was too stupid for words.
    One of our agents was just told by a BoA representative that the Owner did not have to turn in the short sale application until she had an offer on the house LOL!! that;’s all good and fine, but of course in Virginia they can foreclose 60 days from date of notice.
    It just makes me shake my head and wonder why.

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