Thousands Who Waited Hours At Los Angeles Convention Center For 'Save The Dream' Foreclosure Help Are Still Likely To Lose Their Homes
A weekend of illusions?
Up to 30,000 homeowners crammed the L.A. Convention Center in recent days seeking help at the "Save the Dream" event -- from which Mayor Antonio Villaraigosa repeatedly tweeted about the efforts by the Neighborhood Assistance Corporation of America to save people's homes.
What most of the upbeat headlines and buzz failed to convey, however, was that the efforts by the Boston-based non-profit aren't likely to make a dent in the foreclosure disaster still unfolding in Los Angeles and Southern California. Here's why:
The 24-hour-a-day venue downtown drew tremendous coverage from TV stations and the Los Angeles Times, which ran pictures of crowds waiting anxiously on their fold-up chairs in front of the Convention Center, hoping for assistance.
Customers had face-to-face time with bank representatives and loan officers, who offered to help them with delinquent loans or negotiate better plans on their mortgages.
Neighborhood Assistance Corp. or America claims that less than 12 percent of its customers have defaulted on their modified loans, and that it has saved thousands of homes from foreclosure.
But consumer groups are among those questioning whether such groups are having any effect on foreclosure rates.
About 1.7 million homeowners in the U.S. received foreclosure notices in the first half of 2010, according to the feds.
In Los Angeles County alone, it's really ugly: more than 400,000 homeowners have negative equity, meaning they owe more money on their mortgages than their homes are now worth.
And critics of the Neighborhood Assistance Corporation say the group has failed on its promise of securing loan modifications.
CALPIRG's consumer analyst, Pedro Morillas, is not familiar with the organization, but he doubts the group's overall approach of securing better mortgage agreements is working, since it has no power to enforce the new deals.
"The banks are holding all the cards at this moment," said Morillas.
In California, he says, lenders can reject a loan modification application for any reason they wish.
So, even if a customer managed to negotiate a plan with a bank this past weekend at the Convention Center, the true -- but bad -- news is that there's no guarantee any of that will turn out to be real.
"The state has no recourse to go after banks to do anything," he explains.
Ultimately, Morillas thinks the best way to fight foreclosures is to create stricter laws that protect homeowners, such as the mandatory mediation program in Philadelphia.
"There, judges can force banks to modify loans," he said -- not so in California.
The two-year-old Philadelphia pilot program has saved 30 percent of homes from foreclosure, earning accolades. It's been rocky lately: in August, the city posted very high foreclosure rates.
Even so, at a time when promising-sounding foreclosure prevention programs don't seem to be making a dent, mandatory modification is having a bigger impact.
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