A Grassroots Approach to Foreclosure Prevention
Some of the country’s largest banks taking a grassroots approach to foreclosure prevention, counseling and loan modification see it as the best way to secure successful workouts.
Recently Chase’s servicing unit opened here the first of nine homeownership assistance centers it has planned to start up in California, leading the creation of a national network of 24 centers expected to be operating by the end of March. These centers assist borrowers who have a home loan serviced by Chase, Washington Mutual or EMC, now a part of JPMorgan Chase.
“We created these local homeownership centers as a place for our borrowers to sit down and discuss their situation face-to-face with trained loan advisors in these challenging times,” said David Schneider, head of mortgage servicing at Chase. “They are part of a wide-ranging initiative to help families stay in their homes whenever possible.” Borrowers in distress will be able to have face-to-face counseling sessions with trained homeownership advisors about ways to review possible workout options and avoid foreclosure. To increase operational efficiency homeowners can schedule appointments in advance. Also to help speed up the process, they are required to bring required documentation, such as recent W-2s and tax forms, recent pay stubs, bank statements and monthly expense documentation, as well as other information explaining their current financial challenges.
Chase said its advisory network is an extension of its long-term strategy. Since 2007 the bank said it has helped prevent 330,000 foreclosures on Chase, WaMu and EMC loans, “primarily by reducing interest rates, extending the term of the loans and providing principal deferral.” At year-end 2008, Chase announced initiatives designed to help a total of more than 650,000 families, and expects to modify more than $110 billion of home loans.
Chase will open another three centers, designed to help families struggling with their mortgage payments, in Los Angeles, Orange and San Bernardino counties. By the end of the month, Chase said it plans to have a total of nine centers throughout California. These offices will be in Sacramento, San Diego/La Mesa, Oakland, Santa Clara and Stockton. Five homeownership centers will open in Florida. Other centers will open in Washington, Atlanta, Detroit, New York, Philadelphia, Phoenix, Denver, Chicago and Las Vegas.
These new centers are opened in the most distressed areas where Chase and other banks are making concentrated efforts to provide workout options. For example, Genworth Financial, Richmond, Va., a mortgage insurer that helped almost 14,000 families avoid foreclosure in 2008 through its Homeowner Assistance Program, reported Florida, Michigan, Pennsylvania and Indiana saw triple-digit increases in workouts year-over-year. It also said that Florida, Texas and Georgia ranked highest in the nation for states with the most successful workouts.
Genworth’s Foreclosure Prevention Scorecard analyzed the increase in mortgage workouts conducted with its loan servicer partners in the 12-month period from Jan. 1, 2008 through Dec. 31, 2008.
Florida both had the largest gain in workouts and was the No. 1 state where workouts occurred in the fourth quarter with a 253% increase over the fourth quarter of 2007. It was followed by Texas, with over 1,100 workouts in the fourth quarter of 2008. Houston and Miami continue to top the list of the leading cities for workouts.
Based on Genworth’s loss mitigation efforts, the report lists data for the top 10 states where workouts occurred over the 12-month period: Florida, Texas, Georgia, Ohio, Michigan, Pennsylvania, North Carolina, Illinois, New York and Indiana. Of the 13,807 homeowners helped by the company’s foreclosure prevention efforts, 90% received a “cure” mortgage workout, meaning the borrower was able to save their home and become current on their mortgage. The remaining 10% avoided foreclosure through a “non-cure” workout.
“We expanded our Homeowner Assistance Program early in 2008 so that we could help more customers keep their homes. Clearly that investment is working,” said Alan Goldberg, vice president of homeowner assistance for Genworth’s U.S. mortgage insurance business. “An insured mortgage gives homeowners an added layer of protection, and provides peace of mind in knowing that we’ll work with them if they encounter financial problems. Some of our products include job loss protection at no additional charge that pays the monthly mortgage bill in the event a customer involuntarily becomes unemployed.”
Nationally, mortgage workouts increased year-over-year by 60%, according to Genworth data. Repayment plans accounted for most workouts with 39%, followed by loan modifications with 34%, Fannie Mae’s HomeSaver Advance with 17%, short sales 9% and deed-in-lieu of foreclosure 1%. Forty-three percent of borrowers helped had a monthly mortgage payment under $1,000. The report also shows that the fourth quarter was the most active for foreclosure prevention programs, with 4,795 workouts compared to 2,872 in the first quarter and successful workouts increased 129% compared to the fourth quarter of 2007.