HONOLULU (HawaiiNewsNow) - Seventeen U.S. Senators including Hawaii's Daniel Akaka have written Treasury Secretary Geithner asking him to push lenders to do more loan modifications for mortgage borrowers in distress.
"Countless constituents tell us stories of being stonewalled by banks for very long periods of time; of not being told the reasons for the rejection of their modification request; of significant delays caused by banks losing paperwork; or of trial modifications cancelled with no rationale," the letter said. "We cannot let this continue."
Banks on the mainland have said that most homeowners who are delinquent on their home loans are too far behind in their payments for a loan modification to be of any help, but the senators say lenders may be obstructing the program.
"Too many Hawaii homeowners continue to lose their homes to foreclosure," Akaka said in a statement Tuesday. "Borrowers should expect mortgage lenders and servicers to put forth a good faith effort to help them keep their homes."
Citing known cases of lenders illegally churning out foreclosure notices without required oversight, and a handful of cases where lenders even foreclosed on homes they did not own, the senators suggest that the government trusts lenders too much on loan modifications.
"Too often the mortgage modification appeals process consists of the government simply repeating the unsupported assertions of banks and mortgage services about homeowners not being eligible for a modification," the letter said.
The mortgage modification program carries an allocation of $50 billion in federal funding, but in nine months less than $500 million has been needed because of the low number of mortgage modifications granted.
About a third of trial modifications have been converted to permanent modifications fewer than 500,000 individual mortgages nationwide, while more than half, or more than 700,000 other mortgage modifications, have been cancelled.
"If many banks and servicers are not handling even basic foreclosure procedures correctly," the letter said, "it is likely that many are also not correctly evaluating homeowners for mortgage modifications."