Home Foreclosures Continue, Despite Bank's 'Freeze'
Some homeowners say they are still receiving foreclosure notices, even from banks that have said they would halt the process until the New Year.
Over the past month several large financial institutions have sworn to halt foreclosures during the holiday season. JPMorgan Chase (JPM) started the ball rolling on Halloween with an announcement saying it would "not put any additional loans into the foreclosure process" (BusinessWeek.com, 10/31/08) for 90 days. The bank said it hopes to keep 400,000 borrowers in their homes by modifying terms of their loans, opening more mortgage counseling centers, and reaching out to borrowers in distress.
Yet a BusinessWeek.com reader who lives in Washington State says he started receiving notices asking him to call the "loss mitigation" department at Chase on Nov. 25. But that wasn't all, says the homeowner, who wrote into BusinessWeek and asked that his name not be used.
"Foreclosure is scary as hell," he writes. "They send strange men to your house after dark on Saturday night to hand-deliver copies of documents from a metal lockbox. Every day brings more certified mail. The mailman has to knock and wait for us to sign things—three different certified copies of everything, one to 'occupant' and one to my wife and I."
Christmas Due Date
Another homeowner who says her loan is also from Chase wrote to BusinessWeek: "They have not stopped the foreclosure process on my home. I have to pay $4,800 on Christmas. … Sad, so sad."
Thomas Kelly, a spokesman for Chase, says that in some cases loans are owned by another lender and Chase is just collecting payments. In those situations, Chase has to proceed down the foreclosure route. The Washington State homeowner, for example, had a loan with Washington Mutual, which was taken over by Chase in September. His loan is ultimately owned by mortgage giant Freddie Mac, Kelly says.
Fannie Mae (FNM) and Freddie Mac (FRE) also swore to freeze foreclosures, on Nov. 20. The two firms agreed to not take over any occupied single-family homes or evict residents from Nov. 26 until Jan. 9. The companies, two of the nation's largest holders of mortgages, were recapitalized by the federal government in September.
Brad German, a spokesman for Freddie Mac, says that while foreclosure filings may in some cases be proceeding, the company does not intend to take the houses back. German says Freddie Mac hopes to have final plans in place by Dec. 15 that will allow it to quickly modify loans to more affordable rates to keep borrowers in their homes.
"We want to make it easier to help [mortgage] servicers modify loans," says German.
More Homeowner Help Ahead?
The Fannie Mae and Freddie Mac programs are borrowing from initiatives first begun by the Federal Deposit Insurance Corp. (BusinessWeek, 10/8/08) after its takeover of IndyMac Bank in July. The programs aim to reduce borrowers' mortgage payments to 38% of their monthly income. Some states are also following along: On Dec. 1, Florida Governor Charlie Crist announced an agreement with the Florida Bankers Assn. trade group to hold off on foreclosures for 45 days.
On Nov. 25 the Federal Reserve announced it would pump another $800 billion into the economy, including half a trillion dollars to purchase mortgage-backed securities. This was on top of the $700 billion the Treasury Dept. is spending, mostly by purchasing preferred stock in banks to encourage lending.
Still, pressure is building (BusinessWeek, 11/26/08) to have the federal government come with a larger and more direct solution for homeowners in trouble. On Dec. 2 the credit bureau TransUnion reported that nearly 4% of all homeowners nationwide were 60 days or more late on their payments in the third quarter, compared with 2.5% in the same period one year ago. The company said the percentage could approach 5% in the fourth quarter.
Meanwhile, the stress continues for those who are caught in the middle.
"It's really bad, and is affecting my physical health and my family's mental health," writes the Washington State homeowner. "Another lady came and surveyed our house and then knocked on the door to hand us a slip of paper from the bank. She warned us that foreclosure was impending. We're definitely not having a happy holidays."