The mortgage industry would like to have everyone believe they are doing all they can to help homeowners in dire straights.  Even with an improved Hope Now initiave, though, the Attornies General (AG) of many states do not agree.  For example, Ted Cornwell of the Mortgaging Service News wrote this earlier this week.

In early October, Bank of America agreed to provide loan modifications on up to 397,000 Countrywide loans under a settlement with the attorneys general of Iowa and other states. A few weeks later, JPMorgan Chase announced a similar, systemic effort to reach out to troubled borrowers and prevent foreclosures. Both programs seem modeled closely after the FDIC’s plan to provide assistance to IndyMac borrowers, especially those facing unaffordable payment resets on payment-option ARMs. The FDIC has promoted efforts to streamline loan modifications that reduce the borrowers interest rate by refinancing them into a fixed-rate loan, even if the rate or other terms need to be altered so that borrowers pay no more than 38% of their gross income toward their monthly housing costs. Some banks are reducing the payment to principal, interest, taxes and insurance even lower - to 31% in some cases - in order to avert foreclosing on the loans in a difficult housing environment where loss ratios are rising on foreclosures.

Iowa attorney general Tom Miller explained in an interview that he believes a systemic approach is necessary to aid homeowners. He said most of the industry’s biggest mortgage servicers are setting up meetings or discussions with a state foreclosure prevention working group, of which he is one of the leaders. While most are considering a systemic approach, he said there are some holdouts that remain focused on taking a case-by-case approach to loan workouts and are reluctant to embrace a streamlined modification program.

“That’s not acceptable. That’s not going to work as an answer or a policy,” Mr. Miller said.

He said the AGs and banking regulators involved in the foreclosure prevention working group are supportive of the Bank of America concept and wrote to other servicers, including Chase, asking them to do at least as much for their borrowers.

Because foreclosure is governed by state law rather than federal law (although this is blurring somewhat nowadays), a state AG…or a group of them in this case…can make a big difference.  If you’re not getting any resolution from your lender even though you’ve tried, I’d recommend checking with your state’s AG office to see what they’re doing that might be able to help you out.

It looks like systematic reform is on the way if the federal and state governments have their way.  That means lenders won’t be handling most foreclosures on a case-by-case basis any more.  They’ll have to start handling them as a group…which will be good for some and bad for others.  If your case is like the “average” case they build the solution for, you’ll be good.  If you’re outside of that “norm,” though, you will revert to the case-by-case evaluation.

Stay tuned…things are changing fast.