Could One Phone Call Prevent Most Foreclosures?
As increasing foreclosure rates continue to cause panic, industry experts strongly believe the mortgage havoc is avoidable for most homeowners in distress.
Earlier this year the California Association of Mortgage Brokers urged homeowners, lenders and brokers to look for early signs of default and take action. CAMB's immediate past president, Jack Williams, told NMN he thinks "a high number" can be worked out even though California tops the national foreclosure chart.
Back in February, he said, "Nearly 80% of foreclosures can be avoided if the borrower recognizes the warning signs and contacts their broker or lender immediately to help resolve the problem." Asked whether his prediction has changed, he said, "I'd still say it's pretty high at 70% to 75%, if customers get hold of the lender in time.
"The problem they have is the workouts. If they wait until the last minute to call the lender, then there's not much a lender can do." The main reason why foreclosure is highly preventable right now, he added, "is because the lenders are bending over backwards trying to do workouts." The only drawback to that is time. "Lenders are geared up, but there's all this volume all of a sudden. Therefore it may take from four to six weeks to get it all done."
He is optimistic it can be done. "Not everybody will qualify for a mortgage workout, but if they keep their mortgage current and still have a fairly decent financial situation, lenders will be able to work with them."
He believes having the right perspective can help change the current default and foreclosure risk nightmare into a workable challenge.
"The one thing I would like to stress to the lenders is to make sure they know who they have in their pool of high risk," Mr. Williams said. "Who's got the 2/28s, who's got the 3/27s, who's got the two-year or three-year prepay? And they can tell if someone is starting to make a couple of payments late. They can tell if a customer's history is that they have been paying on time and now all of a sudden they're late, and then they have to deal with the late fee."
Once lenders detect a pattern, he argued, "It will be of huge help if lenders start calling these people and ask whether they are getting into a financial hardship, and ask them to notify the lender if rate changes are causing them problems."
It appears that an inquiring phone call that initiates the workout process is the first step towards preventing foreclosure, which is the cheapest, easiest and less demanding effort.
"Yes, it does take just a phone call. Either form the lender or from the borrower, from the customer and back to the lender, one way or the other they got to communicate," he said. "What really needs to be done is that in that phone call or in that letter to the customer to give them a number they can call that gets directly to the loan modification department or mitigation department."
That way customers will not get lost into a lender's system, he explained. "They have such trees of connections," often automatic systems that link a call to the wrong department. A customer may be told: "We don't do that kind of thing" by a bank officer, but what they mean is their department doesn't, not the company, but the customer ends up thinking, "They don't want to talk to me," he said.
"Even I, when I've worked on workout programs, have had such difficulties and even I have had difficulty getting the right officer and I know what I'm doing," he said. "And Mary my partner who works here keeps saying if it's hard for us can you imagine what it is like for customers?"
He agrees however that the situation in the marketplace is really bad.
"We haven't seen anything like this in 25 years, with originations and the housing market all together, usually is one or the other, but not both. For instance, about 40,000 people just got laid off this week."
Similarly the National Foundation for Credit Counseling, Silver Spring, Md., quoted recent data from the Department of Housing and Urban Development that show "counseling is an extremely effective way" to help consumers facing foreclosure and improve consumer-lender communication.
A company release states, "In fiscal-year 2006, 93.1% of NFCC clients within the HUD intermediary who received housing counseling and for whom the NFCC has confirmed outcomes avoided foreclosure."
Consequently it has stepped up its efforts to assist homeowners in danger of losing their homes. Consumers can call a NFCC toll-free hotline that will connect them with certified housing counselors.
NFCC is one of the nation's largest and oldest nonprofit financial education and credit counseling organization whose HUD-approved 1,000 community-based member agencies annually assist about two million consumers.
"In this country's current housing crisis, we are prepared to stand by consumers to provide assistance and do everything possible to keep them in their homes," said NFCC president and CEO, Susan C. Keating. (c) 2007 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com http://www.sourcemedia.com/