SALEM, Ore. -- The federal government's plan to rescue our housing market has been moving like molasses.
Lenders continue to foreclose on properties at a record clip.
In Oregon, banks have not been required to tell homeowners why they're losing their homes.
“Look at this beautiful notice to default,” said Joanne Smith as she holds a notice from her lender to foreclose on her historic Salem home. “I’m not even upside down, I have equity,” said an exasperated Smith
Smith's troubles started when her monthly mortgage payments mysteriously doubled about a year ago. It took months to clear up what she says was the lender's mistake.
“They were charging me for their insurance and their insurance was about a thousand dollars a month which was crazy,” said Smith. “However, you already had your own insurance?” asked Havrelly. “Yes I did.”
The paper battle to fix the mistake ended up damaging her credit rating. Now, her adjustable rate mortgage payments are jumping each month, but her lender won’t lower her interest rates because of her bad credit.
Smith has been spending her retirement account money to cover her higher mortgage payments, but if they’re not lowered soon, she’ll lose the home she purchased 8 years ago.
“Banks don't have to explain why they're refusing to negotiate,” said Oregon Attorney General John Kroger.
Under Oregon law, banks and lenders have been able to turn down loan re-modifications and foreclose on homes without ever providing homeowners with detailed information as to why.
During Oregon’s one month legislative session which ended last Thursday, lawmakers made some moves to change the way lenders do business in Oregon. Both the house and senate passed bills requiring banks to give homeowners detailed information explaining why their being turned down for loan re-modifications.
“Banks are repeatedly losing information that homeowners say they've sent multiple times, but then they're using the fact that they can't find the information as an excuse to not modify the loan,” said John Bartholomew with the Oregon public Interest Research Group.
Bartholomew pushed lawmakers to pass those tougher banking laws. He said more transparency is very much needed especially because of our mortgage meltdown.
“Loan servicing companies, which are now the middlemen in these transactions between homeowners and the banks, actually make more money off foreclosures than loan modifications,” said Bartholomew.
“They're not like traditional lenders who are interested in having their borrower prosper and pay on the debt,” said Kroger.
Linda Navarro from the Oregon Bankers Association says Mortgage lenders are already closely monitored by several federal agencies. She’s not against increased disclosure, but has concerns.
“I feel like this legislation was rushed through the shortened one month legislative session and could have many unintended consequences like more lawsuits which will increase costs for everyone,” said Navarro.
“I'm still not modified,” said Smith after trying to work with her lender for nearly one year. She claims her lender keeps losing her paperwork. It’s one battle after another and she could lose her home in a matter of weeks.
“We must do something in this country or this civilization is going to fall apart.”
Governor Kulongoski is expected to sign the bill tightening Oregon banking regulations into law in the next few weeks.
