This article first appeared in the St. Louis Beacon, Feb. 13, 2009 - A temporary moratorium on foreclosures announced Friday by two of the nation's biggest lenders will temporarily stop the clock and buy precious time for homeowners trying to avoid foreclosure, say St. Louis area housing counselors.
"Anything that gives us a little more time, leverage and resources to keep people in their homes is a good thing,'' said Chris Krehmeyer, executive director of Beyond Housing, a nonprofit housing agency that counsels troubled homeowners.
JP Morgan Chase & Co. and Citigroup Inc. announced the temporary halt to foreclosures while President Barack Obama's administration works out a plan to soothe the hurting U.S. housing market.
"We believe three weeks is adequate time for the Treasury to announce -- and for us to implement -- a new plan,'' wrote JPMorgan Chief Executive Jamie Dimon in a letter released on Friday by Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee. The moratorium is directed at owner-occupied homes through March 6.
Frank had urged the mortgage industry to enact foreclosure moratoriums while the administration puts together a $50 billion foreclosure prevention plan that would set national standards for modifying home loans.
Citigroup's moratorium, announced in a news release, would run through March 12, or until the administration has finalized details of a modification program, whichever comes first.
"To reiterate the commitment made by Chief Executive Officer Vikram Pandit to the House Financial Services Committee on February 11, 2009, Citi is taking the necessary steps to help American homeowners keep their homes. As part of this commitment, Citi has initiated a foreclosure moratorium on all Citi owned first mortgage loans that are the principal residence of the customer as well as all loans Citi services where we have reached an understanding with the investor,'' the release stated.
Eric Madkins, director of housing and foreclosure intervention for the Urban League of Metropolitan St. Louis, called the announcement good news.
"Homeowners, investors, mortgage companies, and servicers have to reach common ground,'' Madkins said.
The housing counselors say the foreclosure crisis is no longer confined to people who took out risky sub-prime or other high-cost loans. Their agencies are beginning to see a new wave of homeowners who are having trouble paying their mortgages because they have recently lost their jobs. More than one-quarter of a million U.S. households received a foreclosure-related notice in January, according to RealtyTrac.com.
"Household incomes may have decreased or stagnated due to unemployment or underemployment. This can represent an obstacle because at the time of purchase, the income may have been sufficient to maintain the mortgage, but the affordability may have, in essence, changed,'' Madkins said. "For borrowers who are facing foreclosure or default, a loan modification allows a more long-term, workable solution.''
Krehmeyer said that while the moratorium is a sign of good faith for these two lenders, it is just one more in a series of piecemeal steps that still haven't addressed what's needed to curb foreclosures: loan modifications that are workable for homeowners and acceptable to the banks.
"What we're hoping for is a systemic fix,'' he said.