Can't refinance? Call your congressman

/ Source: The Associated Press

Can’t afford your mortgage payment? If the bank won’t take your call, your member of Congress just might.

Several lawmakers whose districts are drowning in foreclosures are taking unprecedented steps to help people stay in their homes, including picking up the phone themselves to negotiate with banks on behalf of their constituents.

The pain of being put on hold for an eternity can be an educating experience for a member of Congress.

As a body, Congress has failed to come up with a broad fix for the foreclosure crisis. So some lawmakers are helping homeowners one at a time and seeking creative ways to make a difference in their districts.

Rep. Elijah Cummings, a Maryland Democrat whose Baltimore district has been walloped by unemployment, arranged for 19 banks to set up shop at Morgan State University on Saturday to work with homeowners struggling to pay their mortgages.

Cummings is asking people to come to his anti-foreclosure fair with recent pay stubs, tax returns, their monthly budget and any late notices or foreclosure threats they’ve received by their banks. He predicted 500 people would show up, a turnout he hopes will help convince the White House that federal money is needed to bailout homeowners directly.

“We may very well be reaching the point of a tsunami of foreclosures,” he said.

While Maryland has been hit hard, with more than 390 foreclosure fillings in Baltimore alone in April, California is in the worst shape. Some 342,000 U.S. properties fell into foreclosure in April with 96,500 of those filings — more than one in four — in California, according to RealtyTrac, a Web-based company that compiles data for most U.S. counties.

Rep. Maxine Waters, who represents Los Angeles, has called mortgage lenders directly to seek lower payments for her constituents.

Waters said it’s frustrating. She’s spent more than an hour on hold before, listening to music and getting transferred to different departments.

She said the process can be worse for homeowners who are only slightly behind in their mortgage payments. A grossly delinquent homeowner might get a specialist on the line who can modify the loan, Waters said. But other cases are handled by someone who merely threatens homeowners to pay up.

In at least two cases, the congresswoman said, she wasn’t able to resolve the situation until she appealed directly to the chief executive officers of Bank of America and Wells Fargo. Both banks responded favorably, with Wells Fargo even sending Waters a long letter of apology.

“Trying to contact the servicers is an absolute nightmare for anyone,” even a member of Congress, she said.

While liberal Democrats like Cummings and Waters want to force banks to absorb losses and keep more people in their homes, other lawmakers see that as a recipe for disaster. Many banks already are on shaky footing because of the mortgage crisis. Forcing the industry to take even bigger hits could further clog credit lines or drive up interest rates for other customers.

Last month, Republicans and conservative Democrats defeated a proposal by Sen. Dick Durbin, D-Ill., that would have given judges the power to lower mortgage payments for people declaring bankruptcy. President Barack Obama had once promised to help push the measure through Congress but backed off after banks warned that it would devastate the industry.

In the end, Obama signed a “Hope for Homeowners” bill that makes it easier for people to qualify for a program featuring government-insured mortgages. That program, however, relies on voluntary participation by lenders and so far has been largely unsuccessful.

Treasury officials say the program needs more time.

Meanwhile, more foreclosures are afflicting wealthier communities hit by job losses. Whereas the subprime crisis once seemed exclusive to minority communities like those in L.A. and Baltimore, defaults on prime fixed-rate loans — considered the least risky — have doubled in the past year, says the Mortgage Bankers Association.

The lack of a tough antidote has left congressional offices and banks alike flooded with requests by financially stressed homeowners. Banks sometimes agree to hold off on foreclosing while negotiating with the customer. But homeowners often say they can’t get through to talk to anyone at the bank who can help them.

Bank representatives say they are playing catch-up in the crisis.

JPMorgan Chase & Co. said it recently added some 950 loan counselors to its staff and is hiring hundreds more each month. The bank also has set up a hot line designated solely for congressional staffers trying to ensure their constituents reach a loan counselor.

Other banks are trying as well to become more responsive to congressional offices. Cummings asked a dozen of the nation’s biggest banks to assign an employee to work directly with his office. Most agreed.

In March, Cummings hired a new staffer of his own to work foreclosure cases in his district. So far, the office has been able to help 18 homeowners and is working with some 120 more, according to a spokeswoman.

House ethics rules caution lawmakers about getting involved in private disputes, but don’t explicitly prohibit them from doing so.

Cummings and Waters say they have no choice but to intervene until the federal government is willing to do so.

Cummings said the mortgage crisis will lift. But he worries thousands more people will be homeless by then.

“It’s not whether the sun will come out,” he said. “It will. But the question is, what will the landscape look like when it does?”

More information