Coakley to report to Congress on loan modification progress
BOSTON (Legal Newsline) - Massachusetts Attorney General Martha Coakley submitted written testimony Thursday to the U.S. House Financial Services Committee.
The testimony showed the findings of her office's investigation into mortgage loan modifications for homeowners who are struggling to make payments and facing foreclosure.
Coakley claims the investigation found a lack of progress on that front.
"Based upon our experiences here in Massachusetts, lenders, holders and servicers have not lived up to their very public promises of avoiding foreclosures by achieving loan modifications," she said.
The House committee, chaired by Rep. Barney Frank, D-Mass., is holding a hearing Thursday to discuss the implementation of new federal foreclosure mitigation legislation.
Coakley will appear before the committee to offer testimony regarding her office's role in investigating the practices of brokers selling auction rate securities to municipalities and other state entities.
"We appreciate Congressman Frank's and his committee's diligent attention to this issue and hope that they will hold the industry's feet to the fire at today's hearing," she said.
"We have been very active at the state level in urging the mortgage industry to take meaningful action to decrease the number of foreclosures, but we need Congress' continued help in effectuating real change."
The testimony submitted today outlines Coakley's findings. Specifically, she states that:
-Loan modifications are not being achieved in significant numbers. When compared to the number of foreclosures in process, far too few borrowers are able to restructure their loans to generate a sustainable loan; and
-When so-called loan modifications do occur, they often do not result in a sustainable loan. Lenders and servicers routinely offer and complete so-called loan modifications that increase monthly payments and increase overall debt. They do not meaningfully avoid foreclosure. At best, they temporarily delay the inevitable delinquency and eventual foreclosure.
In addition, Coakley's office has reviewed 144 loan modification documents and claims it found none of the modifications actually reduced the principal mortgage balance of Massachusetts, nor did they reduce the monthly payments for state homeowners.
Coakley will appear in person to testify Friday before the committee, along with officials from the Federal Deposit Insurance Commission, the Federal Reserve Board of Governors, the U.S. Department of Treasury, the U.S. Department of Housing and Urban Development, the National Consumer Law Center and the National Association of Realtors.
Representatives of several of the nation's largest mortgage lenders and servicers, including Chase, Bank of America and Wells Fargo, will also be present.