For many Americans, the mortgage industry's feeble response to the plight of homeowners facing foreclosure has been infuriating. Mortgage servicers and lenders are often tough to get on the phone. Attempts to refinance a loan or extend mortgage payments to avert foreclosure are as discouraging. As a result, foreclosures continue to mount, families are forced to leave their homes and communities are left with an increasing toll of vacant houses.
In Baltimore, the impact of the housing crisis has been felt in neighborhoods as diverse as Reservoir Hill and Belair-Edison.
The Obama administration has proposed financial incentives to try and spur loan modifications. But two Baltimore City Council members are relying on a blunter instrument to get lenders' attention.
Council members Mary Pat Clarke and Bill Henry have introduced legislation that would prevent banks and other lenders from taking possession of a foreclosed property for one year. The bill would extend the eviction period from two weeks from the date of a foreclosure or sale for nonpayment to 365 days. That's some stick. While we can sympathize with the council members' frustration at the lack of response by so many lenders, a hammer - and that's what their proposal is - may not bring the relief troubled homeowners desperately need.
Why? Because the legislation doesn't take into account the complexity of the mortgage crisis and the loans involved.Many mortgages have been repackaged and are held by mortgage security trusts, which may restrict their modification. Speculators also would benefit from this grace period, alongside relatively blameless homeowners and people who never should have been sold the house to begin with. And what incentive would the occupants of a foreclosed home have in maintaining a property that they no longer owned and would soon be leaving?
The Clarke-Henry proposal should get lenders' attention - too few homeowners have found relief through voluntary efforts by banks and other financial institutions. But none of the bill's sponsors (a majority of the council has signed onto it) should delude themselves into thinking that this big stick is going to do the trick.