A government watchdog group released a report yesterday saying that the new changes to government foreclosure prevention plans open cracks for consumers to be scammed and for the government to be scammed by banks. Here are some excerpts from the recent AP article on the topic:
Last month, the Treasury Department revised the $75 billion mortgage assistance program it first rolled out last year. It is intended to prevent 3 million to 4 million home foreclosures by encouraging mortgage lenders to lower monthly payments.
So far only about 170,000 homeowners have qualified for mortgage modifications and critics charge the effort isn’t making much headway. In a report last month, Barofsky’s office said that a lack of planning and shifting rules on who qualifies has slowed the program’s progress.
In response to the criticisms, the administration made several changes. Mortgage lenders will receive incentive payments if they reduce the amount borrowers owe. That would help homeowners with mortgages larger than their homes are worth — a situation known as being “underwater.”
In addition, unemployed homeowners can get their mortgage payments cut to 31 percent of their income for three to six months.
In his report, Barofsky called the changes “a potentially important step forward for homeowner relief.”
But, while the changes were announced “with great fanfare, little was done at the time to warn borrowers” about potential fraud, the report said.