AGs Say 70% Don't Get Help

A task force convened by 11 state attorneys general claims that seven out of 10 seriously delinquent home mortgage borrowers "are not on track for any loss mitigation option."

While praising the loan servicing industry for their cooperation and efforts to help borrowers, representatives of the foreclosure prevention task force, led by Iowa's attorney general, Tom Miller, say that more still needs to be done.

The task force found that among those delinquent borrowers who are communicating with their servicer, 45% are working toward a loan modification.

The attorneys general findings are somewhat at odds with data from Hope Now, an alliance of servicers formed to promote streamlined modifications and other efforts to keep troubled homeowners in their homes.

Hope Now estimates that servicers helped 869,000 borrowers with repayment plans and modifications during the second half of 2007, 545,000 of them subprime borrowers.

That group's updated data suggest that 68% of delinquent subprime borrowers were helped in the second half of last year, up from a previous estimate of 39%.

Also, Hope Now said that while foreclosure starts have increased, only about one-third of foreclosure actions that are initiated actually end with a foreclosure of the home.

The CSBS state foreclosure prevention working group, convened last summer by Attorney General Miller, has met with 13 of the nation's 20 largest servicers of subprime mortgage loans in an effort to increase communication between servicers and troubled borrowers. Those servicers account for nearly 60% of subprime loans, according to the task force.

The task force found that servicers have increased their use of loan modifications and other home retention options. For those delinquent borrowers who are in communication with their servicer, almost half are working toward a loan modification, the task force.

In a conference call with journalists, Mr. Miller said that by pursuing "enlightened self-interest," mortgage investors and servicers can help more borrowers stay in their homes while limiting losses. That approach is modeled on policies that were developed during the farm crisis of the 1990s, when many farmers faced foreclosure, he said.

He praised investors for accommodating the need to pursue wide-scale, streamlined loan modifications, instead of insisting on case-by-case modification procedures.

He said establishing contact with troubled borrowers is key to helping them retain homeownership, adding that nonprofit counseling agencies can aid servicers in this regard.

He said the servicers who met with the task force signed onto the idea of trying to keep more borrowers in their homes "without a blink of an eye." Most had already embraced that principle, he said.

He said servicers have also agreed to provide data to the state regulators on their loss mitigation efforts.

"Progress has been made. I think that's clear. But I think its also clear that a lot more effort has to be made," Mr. Miller said during the call, which was hosted by the Conference of State Bank Supervisors.

"We believe that the public has a right to know how the servicing industry is managing the crisis," said Mark Pearce, North Carolina commissioner of banks, who also participated in the attorneys general task force.

One troubling sign turned up in the task force's analysis: a "significant percentage" of subprime, adjustable-rate borrowers become delinquent before experiencing payment shock from their first rate reset. (c) 2008 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com/ http://www.sourcemedia.com/

Next in News ►