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Servicers See Big Increase in Mods

The Hope Now alliance estimates that mortgage servicers provided borrowers with more than a half-million loan workouts in the first quarter, bringing the total number of workouts completed since last July to 1.4 million.

The alliance says 503,000 homeowners were able to stay in their homes during the first quarter because of loan workouts involving both prime and subprime loans.

Moreover, Hope Now says that loan modifications, which change the terms of the loan to create a long-term solution for the most troubled borrowers, are accounting for an increasing share of the workout total.

Of the 503,000 workouts done in the first quarter, approximately 179,000 wore loan modifications and 324,000 were repayment plans.

But among subprime borrowers, 44% of all workouts consisted of modifications. In March, the loan-modification ratio had risen to 49%, suggesting that the modification share of the total continues to grow.

The first-quarter loan modification ratio for subprime borrowers was twice the rate of borrowers receiving modifications during all of 2007, according to Hope Now.

But the sheer number of borrowers facing rate resets who have had terms changed remains modest. Hope Now servicers modified 14,418 of the 2/28 and 3/27 adjustable-rate mortgages that were scheduled to reset during the first quarter, and 203,000 of the loans were paid in full through a refinancing or property sale.

Hope Now noted that with recent declines in short-term interest rates, the payment shock facing borrowers is now much smaller than it was just a few months ago, so fewer borrowers need modifications to afford the new payments.

"Mortgage servicers continue to focus on doing everything possible to help troubled homeowners avoid foreclosure," said Faith Schwartz, executive director of Hope Now, in a news release. "While there is still more work to be done, concrete progress is being made and Hope Now members will continue their efforts and work to help as many borrowers as possible."

SNAPSHOT: 1st Quarter Workouts for prime and nonprime Loans

Modifications 179,000

Repayment Plans 324,000

Total 503,000

SOURCE: Hope Now (c) 2008 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com/ http://www.sourcemedia.com/

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