What Carol Galante Should Learn From Ben Bernanke

First, allow me to say that I have respect for Carol Galante as a person as well as the position she holds.  With that out of the way, this past week’s acknowledgement by Ben Bernanke that lenders could have tightened lending standards a bit too far should cause Carol Galante to pause and think about the policies she currently has under her control as FHA Commissioner and Assistant Secretary for Housing and Urban Development.  It’s my opinion that she has been proactive when it comes to FHA’s Loss Mitigation efforts but not all of her efforts have had the effect that she expected.

At a conference in Chicago Thursday, Bernanke told moderator Mark Zandi, “I recently tried to refinance my mortgage and I was unsuccessful in doing so,” according to Bloomberg. When the audience laughed, he said, “I’m not making that up.” He added, “I think it’s entirely possible” that lenders “may have gone a little bit too far on mortgage credit conditions.”

Having assisted many families navigate the FHA loss mitigation “waterfall process” with their lender, this shows that more needs to be done under her direction before the end of 2014.  Lenders often thumb their noses at mortgage letters, and based on their lawyers broad interpretation, they often find loopholes that allow them to escape the intended assistance to the distressed homeowner.  My clients are not trying to beat or game the system.  Some want to keep their home but have been out of work for various reasons. While others have gone down a path of following bad advice that keeping their home is no longer a valid option.

Why would a homeowners stop paying their mortgage?  Why would their mortgage company give them bad advice?  Many times the ill trained mortgage customer service person only gives enough information for a distressed homeowner to make an assumption that they are telling them help is available IF they are behind a certain number of payments.  What they both don’t know is that each state has different laws that will have very different effects on the homeowner missing payments.

Bottom line, it’s hard to regulate from a federal position and not cause unintended harm at the state level with regard to foreclosure especially in a non-judicial states like Tennessee which only require 21 days from notice to be sold on the courthouse steps.




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