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 by Jennie S. Bev

A week ago, the office of Rep. Jerry McNerney, D-Pleasanton, and the Mountain House Community Services District co-hosted a Foreclosure Prevention Summit Workshop at Bethany Elementary School in Mountain House.

The resident-led housing activism organization Mountain House Action Group has been involved since the beginning in November 2008 through our advocacy and sharing activities. The event was attended by Bank of America, Chase, Fannie Mae, several Housing and Urban Development Department-approved counselors and more than 150 homeowners.

It was covered by Swiss Public Radio and the Tracy Press.

It is noticeable that the process of loan modification is unclear, due to changing laws and guidelines. Approved HUD counselors so far have been helpful by giving out advice that would protect homeowners’ interests —that’s as opposed to banks, which are likely to focus on their own interests.

Still, I believe that there are many things that can, should and must be improved if loan modifications are to take place appropriately and proportionately. Consumers’ interests must be protected, and it requires more than a few underwriting guidelines.

So far, out of 4 million homeowners who need some sort of mortgage assistance, only 400,000 have been helped, a mere 10 percent. Mortgage giant Wells Fargo merely reduced payments for only 6 percent of its eligible home loans, and Bank of America modified just 4 percent of those in the same category. And they didn’t seem to modify loans outside Obama’s Making Home Affordable program.

MAC and JPMorgan Chase are better, with 20 percent modification rates.

Unfairness in the loan modification process, however, can be reduced — if not eliminated — provided there is a law that would protect the interests of consumers, including home loan borrowers, in force majeure circumstances.

Force majeure is a legal term used to describe an unpredictable event that would hinder the fulfillment of an agreement. In a broad definition, economic crisis can be categorized as this type of event.

In certain circumstances based on macroeconomic calculations, such as today’s recession and foreclosure crisis, consumers should have the right to have their loans (any loans) reconsidered and renegotiated without discrimination.

To this very day, such a consumer right has not been codified into law.

Consumer Protection Law, which is the basis for Chapter 13 Bankruptcy rules, has been quite potent in this crisis. But it is applicable only on a case-by-case basis. What we need is a law that would streamline the colossal process of loan modification by making it a consumer emergency right for economic protection under any force majeure.

If that were the case, lenders would be required to work with consumers to ensure that they can afford their loans.

Another possible idea would be to close loopholes in the loan modification process.

While banking is a regulated industry, today’s foreclosure crisis has set a new bar in loan modification, a process that comes with gaps as big and as wide as the Grand Canyon. These loopholes benefit lenders instead of consumers.

So far, it is common knowledge that most banks would prefer foreclosure to loan modification, because the former would give them cash immediately, while the latter would only give them a negotiable promissory note. And cash, of course, is much more preferable in an economic crisis.

Now is good timing to demand more consumer rights, and we can start with ourselves by writing to our representatives, joining forces with interest groups and writing to the media.

If we don’t act, good citizens will continue to be punished by financial institutions and unfair laws. And we aren’t that dumb to let this situation continue.[]

Tracy Press, August 22, 2009

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