LANSING, MI – February 05, 2009 – (RealEstateRama) — Attorney General Mike Cox today announced that he and 11 state attorneys general are questioning a federal report which could cause more home foreclosures because it over-estimates how many homeowners defaulted after using the mortgage modification process. Cox fears the report may cause lenders and policymakers to reduce the number of future modifications.
“For many families, modifying an existing mortgage is the only way to avoid foreclosure,” said Cox. “This report sends the wrong message and may lead to more home foreclosures.”
The report, issued by the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS), stated that 55% of modified loans went into default within six months. However, evidence cited by state attorneys general found that the percentage was actually about 25%.
Cox and the other state attorneys general called on the federal agencies to share the data used in the report so that states may compare the data to their own. Officials will then be able to provide an accurate picture to mortgage lenders and Congress as they consider loan modification programs.
The attorneys general also said the default rate is higher than it should be because some homeowners ended up with higher monthly payments after modification, a result which must be strongly discouraged by the federal agencies.
Cox, citing his own experience bringing homeowners together with mortgage lenders in statewide forums, said the agencies must aggressively push lenders to offer modifications which help keep people in their homes.
“I have seen first hand how important it is to bring homeowners and lenders together to find ways to avoid foreclosure,” said Cox. “By encouraging lenders to aggressively contact struggling home owners before it is too late, we can keep more families in their homes.”
Mortgage lending issues are a priority for Cox. The Attorney General’s office has held mortgage foreclosure forums where thousands of homeowners were provided opportunities to meet with lenders about modifying troubled loans. Cox has also teamed up with the Michigan State Police and other law enforcement agencies to create a mortgage fraud unit.
The OCC and OTS are federal agencies charged with regulating federal banks and thrifts.
John Sellek or Matt Frendeway