Response to Workout Options Continues to Grow
Despite a surge in media coverage of mortgage delinquencies and defaults, a new survey commissioned by Freddie Mac suggests that many homeowners remain unaware that their mortgage lender may be able to help them avert foreclosure.
But the survey also found improvement of awareness of loan workout options compared with a similar survey done in 2005.
According to the survey, 57% of late-paying home loan borrowers said they didn't know that lenders may offer alternatives to help them avoid foreclosure. That was an improvement from the 2005 survey, when 61% claimed they were unaware of alternatives.
However, when homeowners were asked about specific workout options, such as "repayment plans," the awareness level increased (to 61% for repayment plans). Sixty-eight percent were aware of modifications to adjustable-rate home loans and 78% were aware of the option to pay off their mortgage in a single lump sum, such as occurs in a short sale.
The survey also found an increase in the number of overdue borrowers who say they remember their servicer reaching out to them (86% in 2007, up from 75% in the 2005 survey).
In addition, 44% of late payers were aware that there are housing counselors they can talk to about their mortgage.
"This new survey shows that efforts to get borrowers to call their lenders and counselors are starting to work, but that too many at-risk borrowers are still unaware their servicers routinely provide alternatives that can help them stay in their homes," said Ingrid Beckles, Freddie Mac's vice president of servicing and asset management.
Freddie Mac said it is currently working with servicers to help an average of 1,000 borrowers a week avoid foreclosure through some form of forbearance, repayment plans, loan modifications, or other workout options.
"One problem is that servicers are unable to contact borrowers in more than half of the foreclosures we see at Freddie Mac," Ms. Beckles said. "That's why it is imperative to closely track borrower awareness of workout options so the industry and the government can evaluate and enhance their efforts to get more borrowers talking to their servicers about avoiding foreclosure."
A majority of late-paying borrowers, 75%, reported contacting their lender, an improvement from 68% in the 2005 survey. A majority of those said the contact with their servicer was helpful, while only a quarter said the experience was "intimidating" or "confusing."
The percentage of delinquent borrowers who said they believed there was no reason to call or nothing the servicer could do to help them fell from 48% in 2005 to 33% in 2007.
The survey also found that one in four delinquent borrowers selected the Internet as their first choice for mortgage information, almost twice as many as in 2005. Sixty percent said their first stop for mortgage default information would be a bank or mortgage lender, almost unchanged from 2005.
Snapshot: Survey Finds Homeowners are Gaining Awareness of Options
Issue 2007 2005
Unaware of foreclosure alternatives 57% 61%
Remember servicer 'reaching out' 86% 75%
Actually contacted their lender 75% 68%
See 'no reason to call' servicer 33% 48%
Source: Freddie Mac/Roper Public Affairs survey of delinquent borrowers. (c) 2008 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com/ http://www.sourcemedia.com/