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Digital News Report – Few government programs have received more criticism than the Obama loan modification program. Although the program has helped hundreds of thousands of homeowners keep their home from foreclosure, there have been many complaints.
On Monday, a new class action lawsuit was filed against JPMorgan Chase. Bank of America and Wells Fargo are among other banks that have become the focus of lawsuits or actions through state Attorney Generals.
Lawyers for the plaintiffs allege that Chase instructed homeowners to “stop making mortgage payments under the false pretense that doing so would not hurt their credit scores and was necessary for them to attain a loan modification”.
One of the biggest problems is incentive. It may be more profitable for banks, acting as servicers of the loan, may make more money filing for foreclosure than making a modification permanent.
Lawmakers are also looking into solutions to some of the problems. There is a proposal to increase the incentive to servicers.
Another proposal is to assess penalties against banks. In what some are calling the bill of rights for borrowers, minimum standards may be set up. Servicers may need to hire more staff to deal with inquiries.
Some homeowners say the banks don’t respond to their phone calls or letter. New legislation may require the bank set up a point of contact for the borrower.
Neither the increased monetary incentives to servicers nor a homeowner bill of rights bill has made it through Congress.
By Tina Brown