Since the subprime mortgage crisis hit and foreclosures spiked, homeowners struggling to keep up with their payments have been advised to call their lenders. With a call, a workable solution that could keep people in their homes might be possible. Or so that was the pitch. But it hasn't proved to be true for many borrowers who can't even get someone on the phone.
Now, Gov. Martin O'Malley is the one calling; he wants answers, and he means business.
The governor, with his pugnacious state licensing secretary at his side, has summoned two dozen companies that service loans to Annapolis to find out what they are - or aren't - doing to help Marylanders avoid foreclosure. Consumers and housing counselors have complained to state and federal officials about efforts to reach the industry, which has encouraged homeowners to contact them as the first step in resolving their problems.
But a National Association of Attorneys General survey found that seven out of 10 seriously delinquent borrowers weren't on track to rectify their loans, and only California and Michigan have gone directly to loan servicers to work out agreements to better serve embattled consumers.
Maryland is trying a stick-and-carrot approach. Licensing Secretary Thomas E. Perez has initiated a review of one servicer as part of a stepped-up enforcement plan. The administration also has hired more housing counselors, established a $100 million fund to help eligible homeowners refinance into a conventional loan and created a loan program to help homeowners get current on their mortgages so they can work out a better deal with lenders.
The Mortgage Brokers Association in Maryland says its servicers are doing their part: Of nearly 6,300 homes in Maryland that were in foreclosure in the third quarter of last year, 5,800 borrowers received help to avert foreclosure. But assistance has to be substantive for these contacts to be meaningful. Band-Aid approaches won't work in the long run. At the same time, state officials shouldn't confuse aggressively managing this problem with bullying industry leaders into action.
The subprime mortgage crisis was created by a series of events and players. The fallout included homeowners who were duped into loans with exorbitant interest rates and others who were trying to cash in on the housing boom. It's going to take a concerted, cooperative effort to find fair solutions that can serve borrowers and lenders.
For many, it's too late, but there are many more who can still benefit.