Subprime Nightmares
Many homeowners who were subject to predatory lending practices - including brokers who misrepresented payments - are trying to rework their loans. Few are having any luck.
Most mortgages aren’t owned by a single bank. Instead, they are packaged and sold to investors on the secondary market, which means that loan servicers are actually beholden to investors, not borrowers. Borrowers may be offered a temporary repayment plan, which keeps foreclosure at bay, but tacks the owed money onto to the back of the loan.
“The payments in this kind of workout are unaffordable to the homeowner,” said Diane Cipollone of the National Fair Housing Alliance. “And sometimes homeowners sign it anyway. They don’t know what to do. They know that if they don’t agree their home will go right into foreclosure. But soon they default on the repayment plan, and that’s counterproductive.”
And it’s much harder for troubled borrowers to get a deal that permanently lowers their mortgage payments. The Hope Now Alliance of mortgage lenders and servicers, including Citigroup, Bank of America and J.P. Morgan , says it has kept over one million borrowers out of foreclosure since July. But only about one quarter of them - 278,000 - have actually had the terms of their mortgages modified.
