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A Pennsylvania study recently found what many in one pocket of the state have suspected for a long time. The study of 6,100 foreclosures in the Pocono Mountains region of the state, an area where the foreclosure rate is stunningly high, found that aggressive home sales and mortgage lending practices contributed to the area's problem.

According to the report, developers of a cluster of gated communities located about two hours outside of New York City bear much of the blame for the problem. They allegedly lured former renters from greater New York to the Poconos and sold homes to them at prices exceeding market value. Add to that a level of frustration related to rising crime and long commutes to work, and pretty soon many homebuyers were unable or unwilling to keep making their mortgage payments. Unfortunately, the homes have become something of a tough sell, despite a booming real estate market in the New York City area.

Servicers may not be able to stop aggressive developers and real estate agents from making some sales that shouldn't be made, but everyone in the mortgage industry has a stake in making sure that debacles like the Pocono Mountains situation are not repeated. Loose underwriting and faulty appraisals may be to blame on the loan origination side, but once again it's the loan servicer that has to clean up the mess.

Obviously, not every homebuyer can be saved from foreclosure, but innovations in servicing over the past decade have made it easier for servicers to identify potential repayment plan and workout candidates. That has given servicers the ability to help keep some homeowners in their homes who might have lost the roof over their heads in the past, according to a study from Freddie Mac. Housing advocates and elected officials are pressuring lenders to help troubled borrowers in the Poconos, adding to pressure to keep as many borrowers as possible in their homes.

Fortunately, clusters of foreclosures such as those found in the Pocono Mountains remain rare today. But if real estate price appreciation stalls, as many think is likely, aggressive home sales and lending strategies may turn some loan portfolios sour. We believe the mortgage servicing industry is ready to handle that challenge.

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