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HUD may freeze some foreclosure proceedings
LOS ANGELES — Due to a high rate of loan defaults, federal Housing and Urban Development officials are expected to mandate a 90-day freeze on foreclosure proceedings against area homeowners behind on payments of government-backed mortgages, it was reported.
Defaults are most often happening among the elderly, minorities and immigrants who may have fallen victim to underhanded lending practices. Investigators believe some lenders may have bought back defaulted properties, made cosmetic repairs to them, and then resold them at a higher price.
“This is going to save thousands of homeowners from fraudulent foreclosures,” said HUD Secretary Andrew Cuomo. “We will not allow homeowners to be victimized by unscrupulous lenders.”
Cuomo is scheduled to outline the 90-day moratorium on Monday at HUD-sponsored forum for Los Angeles community and church leaders.
Loan defaults are happening most frequently in 21 ZIP codes in Los Angeles southward to Gardena and Long Beach, the Los Angeles Times reported. In the “hot zone,” HUD officials found homeowners defaulting on loans or filing foreclosure claims at a rate from 7 percent to more than 15 percent. The overall Los Angeles area has a default rate of only 3.6 percent.
The moratorium is similar to a program HUD launched in Baltimore this year. The three-month freeze is used to check out FHA-approved lenders. If there is evidence of wrongdoing, HUD will curb mortgage fees and suspend violators from making government-backed loans. It will ask lenders of FHA-backed mortgages based on inflated appraisals to restructure the loans to reflect current values. If the company declines, HUD will terminate the loan and issue the buyer another mortgage at a fair market price.
“I think this program will help prevent some of the predatory lending that’s been happening,” said Joseph Wilson, one of six representatives from the Association of Community Organizations for Reform Now.