REPORT: SIX OF TEN DELINQUENT BORROWERS NOT RECEIVING LOAN MODIFICATION ASSISTANCE
State Foreclosure Prevention Working Group Report Shows Foreclosures Outpacing Loan Modifications
Chicago — Attorney General Lisa Madigan today called on mortgage lenders to intensify their efforts to reduce mortgage foreclosures in light of new data showing foreclosures in 2010 will outpace lenders’ efforts to keep borrowers in their homes. Madigan is a member of the State Foreclosure Prevention Working Group, which yesterday issued its fourth “Analysis of Subprime Mortgage Servicing Performance,” showing that six out of 10 seriously delinquent borrowers are not receiving loan modification assistance.
“Unfortunately, we’re seeing that as the foreclosure crisis intensifies, lenders still are not providing effective help to struggling homeowners,” Madigan said. “This is unacceptable. We’ve consistently stressed that lenders must implement a broader, more systematic approach to putting homeowners into affordable loans to stave off the devastating effects of foreclosures in our communities.”
The report indicates that the federal Home Affordable Modification Program (HAMP) has led to offers of loan modification assistance to more than 1.1 million homeowners. But, early indications are that the companies that service the loans, which collect and process loan payments during the life of a loan, have been unable to implement the program effectively, and many homeowners with trial modifications are not yet qualified to transition to a permanent loan modification. Seriously delinquent loans increased by 33 percent from October 2008 to October 2009, according to the report’s findings. However, only four of 10 seriously delinquent borrowers are currently involved in modifying their loan, and the pace of closed loan modifications is slowing significantly. Since February 2009, the total number of closed loan modifications has fallen by 100,000 loans per month.
“To be sure, we would be in a much worse place without these efforts,” the report indicated, but “these efforts must be improved.”
The Foreclosure Prevention Working Group began as a cooperative dialogue of state officials and mortgage servicers in September 2007, and is led by the Attorneys General of 11 states (Arizona, California, Colorado, Iowa, Illinois, Massachusetts, Michigan, New York, North Carolina, Ohio and Texas), the state banking departments in New York and North Carolina, and the Conference of State Bank Supervisors. Since October 2007, the Group has collected data from the largest subprime mortgage servicers, with 13 of the largest 20 servicers participating.
In addition to finding that a majority of delinquent borrowers are not receiving loan modification assistance, the report also concluded that:
The report concluded that these findings forecast a serious possibility of accelerated foreclosures unless lenders make significant changes in their efforts to prevent foreclosure. The report recommended the following changes: