It has been a little more than a month since the government began their “shame the mortgage lender” program by publishing the names and results of mortgage lenders’ foreclosure prevention efforts.  According to an article in the Star-Telegram, approximately 2.7 million American homeowners are at least 2 months behind on their mortgage and facing the possibility of foreclosure, yet only 9 percent of them have been offered mortgage modifications to prevent foreclosure as of June 2009. The Star-Telegram article is interesting because after the government announced their “shame” program, the paper received a large volume of responses from homeowners facing foreclosure. They did a survey of those homeowners facing foreclosure and discovered the following:

#1 – Virtually all say they were encouraged, directly or indirectly, by their lenders to fall behind on their mortgage payments in order to qualify for loan modifications.

#2 – After the homeowners allowed their mortgages to become delinquent, the modifications never came.

#3 – These borrowers burned through retirement savings, destroyed their credit ratings and suffered mental and financial hardship.

This is a travesty. It demonstrates the lack of leverage and power homeowners have with mortgage lenders when faced with foreclosure. It is also a direct result of our government choosing vague “shame” programs instead of concrete bankruptcy laws to combat foreclosure.  You cannot fight powerful mortgage lenders and their servicers with shame, because they have no shame, this is why we’re in the foreclosure crisis now.  This is a lesson to all homeowners who may be at risk of foreclosure–don’t rely on your mortgage lender’s word.  Get every agreement in writing and if your mortgage lender is dragging their feet regarding your mortgage modification you may need to file bankruptcy.