PI Original Josh Kalven Wednesday August 19th, 2009, 12:51pm

AP Misses The Point On July Foreclosure Spike

This lede from the AP -- in their article on July foreclosure filings in Illinois -- is just terrible:

A new law in Illinois that aimed to help give homeowners facing
foreclosure more time apparently led to a spike in problems during
July, according to data ...

This lede from the AP -- in their article on July foreclosure filings in Illinois -- is just terrible:

A new law in Illinois that aimed to help give homeowners facing foreclosure more time apparently led to a spike in problems during July, according to data released today by RealtyTrac.

"Led to a spike in problems" leaves the impression that the Homeowner Protection Act had unintended consequences which ultimately exacerbated the foreclosure crisis.  The takeaway is that state legislators and Gov. Quinn did something wrong by approving this legislation. But that's just not the case.

As we noted yesterday, the law did exactly what it was supposed to do: bought struggling homeowners some time while federal policymakers debated how best to help stem the spread of foreclosures.  The problem is that the programs in place at the national level are underperforming and Congress is yet to push for more aggressive measures.

Here again is the Woodstock Institute's Geoff Smith, as quoted in yesterday's Tribune article:

"The 90-day window is good but only good if you can help the borrower get into a better loan and theoretically that would be through the [federal loan modification] program," said Geoff Smith, Woodstock's vice president. The grace period "seems to have achieved its goal of delaying the foreclosure process. What happens next is where the big question mark is. Are those people whose foreclosure was delayed, are they now getting the help they need?"

The federal program Smith refers to had only produced 50,000 successful mortgage modifications by the end of July.  Meanwhile, over 1.5 million homeowners have filed for foreclosure since the beginning of the year. The banking lobby, meanwhile, has stood in the way of more meaningful legislation.  Their motivations are mixed.  As the New York Times recently reported, some banks are simply "waiting and hoping the economy will improve and delinquent customers will resume making payments," while other interests -- particularly mortgage servicers -- continue to "collect lucrative fees on delinquent loans."

For instance, Sen. Dick Durbin's judicial modification proposal would accelerate the process by taking the control away from the lenders themselves and putting it in the hands of bankruptcy court judges.  Watch for him to revive that measure this fall once more data is released on the White House's voluntary program.   

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