CHICAGO — Federal legislation that gave homeowners more time to get help on mortgage payments may be making a dent in the foreclosure rate here.
The implementation of the Homeowner Protection Act and Home Affordable Modification Program led to a drop in foreclosures across the Chicago area between Q1 and Q2 of this year, a report by the Woodstock Institute noted, but that could be just a "brief lull" as lenders get accustomed to the new regulations and the figure may spike again through the end of the year unless financial institutions make big changes.
"The concern that we've stated previously is that the modification activity is not at the level we were hoping it would be at this point," said Woodstock Institute VP Geoff Smith. "What we have been told from the counseling agencies is that they have hundreds of eligible homeowners based on the program have submitted their information to the lenders and there have only been a few modifications."
Only about 9% of borrowers eligible for a modification under the new legislation have received one. Smith speculated that capacity issues may be causing delays at some lenders and high re-default levels have convinced other financial institutions to simply not take action on some modification requests. But failing to take action could be detrimental not only for the community, but also for the lenders themselves, he argued.
"There needs to be some consideration of principle reductions because there is some value of keeping the homeowner in that property, especially given the real estate market," Smith explained.
