For many, mortgage relief mired in red tape

Rodriguez, like many subprime borrowers, also must worry about a prepayment penalty. Such penalties can equal six months of mortgage payments, Enriquez said. This fall, Stein s group reported that few loan modification requests have been granted in California. The reinvestment coalition surveyed 33 of the state s more than 80 mortgage counseling agencies.

Fifty-seven percent of those surveyed reported foreclosure and 33 percent reported short sale as the most common outcomes for borrowers who can t make payments. In short sales, lenders agree to accept less than they are owed so borrowers with declining home values can sell and avoid foreclosure. It often takes so long for lender approval that such sales fall through, said John Puhek, a broker and owner of a real estate and mortgage company in San Marcos.

If lenders have been slow to react to the lending crisis, it s because they weren t prepared for the surge in foreclosures that began this year, said Dustin Hobbs, spokesman for the California Mortgage Bankers Association. They have had to up their productivity and staffing levels in a hurry. Another reason for delays is that loans that were bundled into securities and sold to Wall Street investors can be difficult to untangle.

A loss-mitigation officer may have to win modification approvals from Europe or Asia. Gabe del Rio, homeownership director at Community HousingWorks, said access to modifications is improving gradually. Some lenders are being aggressive with loan modifications, he said. Certainly people are stepping up to the plate. Borrowers should never assume that getting out of a bad loan will be easy, del Rio said.