Foreclosure Prevention Efforts Not Keeping Pace With Problems
NEW YORK -- Industry measures to keep homeowners out of foreclosure aren't keeping up with the increasing number of foreclosures, according to a study conducted by a group of state attorneys general and state banking regulators.
The State Foreclosure Prevention Working Group found that 80% of homeowners facing foreclosure are not on track for loss mitigation. The group recently issued its analysis of subprime mortgage servicing performance for the period February through May 2008. In a previous study, the group found that 70% of the homeowners were not on track for loss mitigation.
"While some progress has been made in preventing foreclosures, the empirical evidence is profoundly disappointing," the group said in the 10-page report.
The group also found that new efforts to prevent foreclosures are declining, with 40,000 fewer loans in loss mitigation in May 2008 than there were in January 2008; and one in five loan modifications made in the past year is currently delinquent.
The group criticized mortgage servicers for not developing proactive approaches to address subprime loans that are in default before interest rate resets. "Based on the rising number of delinquent prime loans and projected numbers of payment option ARM loans facing reset over the next two years, we fear that continued reactive approaches will lead to another wave of unnecessary and preventable foreclosures," the group said.
Servicers have said that their authority to negotiate loan modifications is limited by the terms of the servicing documents and by their fiduciary responsibility to the investors who hold the loans.
The group concluded that the mortgage industry has failed to develop systematic approaches to prevent foreclosures, leading to a decline in property values and increased expected losses in mortgage loan portfolios.
HUD, Realtors To Partner to
CHICAGO -- The National Association of Realtors and the Department of Housing and Urban Development have launched a Federal Housing Administration tool kit. Realtors can use the tool kit to help buyers obtain FHA-backed mortgages.
The tool kit includes a video of frequently asked questions, a flash media presentation of FHA programs, brochures and other reference guides and links to resources.
"FHA offers a safe alternative to many of the subprime and exotic loans that caused much of today's market turmoil, and the program is easier to use than ever before," Pat V. Combs, NAR immediate past president said.
"Recent revisions to the FHA program will enable more families to achieve their dreams of homeownership and will allow others to refinance their mortgage at terms that will allow them to keep their home," she said.