Advocates say housing aid doesn't go far enough

This week, the Obama administration is launching a nationwide campaign to modify millions of home loans and help people save their homes from foreclosure.

The Making Home Affordable program aims to help an estimated 9 million people avoid foreclosure with refinancing, loan modifications and other assistance. A centerpiece of the $50 billion plan is that people no longer have to be delinquent on their loans to apply.

There were about 5,200 foreclosures in Minnesota in the first four months of this year, with thousands more predicted this year.

Advocates say while the program gives lenders cash incentives for helping homeowners, there are no clear rules on how lenders should run it or how quickly they should process applications. As a result, thousands of people at risk of foreclosure are still waiting.

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East St. Paul resident Azucena Remedios and her husband are typical of the homeowners the Making Home Affordable program is targeting. The couple waited two years before their loan modification application was finally approved. In the meantime, they struggled to keep up with the payments on their adjustable rate mortgage. By the time their application went through, the interest rate was 11.5 percent.

"The interest rate kept going up and up and up," she says.

To save their house, they cut back sharply and went into survival mode. Remedios says she made ends meet by feeding her family on just a few hundred dollars a month. It was difficult for her kids to understand what was going on.

"[We] had to let them understand what was happening - that it was either lose our home or continue to make due with what we had. We preferred to limit ourselves for a while and continue in the house," she recalls.

They managed not to miss a single payment, but they came close. At one point, the house was even scheduled for a sheriff's sale.

The modification brings their payment down by more than $500 a month, and the interest rate is fixed. Remedios says she loves her house, and now that they can afford it, the sacrifice was worth it.

But advocates say lenders need to do more to help people before they reach a crisis point.

University of Minnesota law professor Prentiss Cox says the Obama administration should stop lenders from foreclosing on homeowners until they can be evaluated for help.

"Here is what needs to happen," he says, "we need to stop talking about this and we need the government to come in with a clear set of mandates, clearly enforced with transparent rules. If we have that, we are going to have real loan modifications happen in a systemic way."

Cox says modifying or refinancing more loans is critical now, because keeping foreclosures from flooding the market and continuing to drive down home prices is the only way to stabilize the economy.

Hope Now, a national mortgage industry group, says lenders and servicers are listening. Their numbers show the industry helped 270,000 homeowners in April, a record number.

For their part, lenders say they are adding staff and extra resources to handle all of the requests for help. But Mark Ireland, staff attorney with the Foreclosure Relief Law Project, says there is little evidence that lenders are doing more to help people.

"If it's in nobody's interest to foreclose, why not give people timely loan modifications? If things have been going on and the foreclosure crisis has been going on for two, three years, why aren't the procedures in place to give people answers? Instead you have got folks who are just sitting out there in limbo," he says.