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April 23, 2008 - A group of state regulators and state attorneys general reported April 22 that the collective efforts of servicers and government officials to improve foreclosure prevention have not resulted in meaningful change.
The State Foreclosure Prevention Working Group, composed of state banking regulators and state attorneys general, collected data from 13 of the 20 largest subprime servicers (57 percent of all servicers) dating back to October 2007. The group’s first report, published in February 2008, found that while servicers had increased their use of loan modifications, a large percentage of loans were still seriously delinquent.
In the group’s second report, released April 22, they found that for the most part, the data from January 2008 had not changed from October 2007. “In normal times, one would not expect a significant change in a four-month period; however, this time period involved a dramatic increase in public attention to the subprime mortgage crisis, a ramping up of efforts by the HOPE NOW Alliance, and the initiation of new creative outreach efforts by servicers and government officials,” stated the report.
Seven out of ten seriously delinquent borrowers are still not on track for any loss mitigation outcomes, reported the group, and further data suggests the servicers’ loss mitigation departments are severely strained in managing the current workload. However, the report reveals some good news citing that two-thirds of homeowners who received loss mitigation assistance were directed to loan modification.
The State Foreclosure Prevention Working Group explains that more robust approaches to avoid foreclosures are necessary and a more systematic loan work-out system should replace the intensive “hands-on” approach to loss mitigation. They also suggested a slower foreclosure process to allow for more workouts and a need for enhanced staff capacity at servicers.
Mark Pearce, deputy banking commissioner for North Carolina told the Wall Street Journal on April 22 that “while there’s been a lot of effort put in by mortgage servicers and government officials, there has been little change in outcomes for homeowners.”
The group recognizes that federal officials are considering legislation to improve the current crisis, but feels more needs to be done. “While we do not endorse any specific federal approach, we support the development of innovative approaches that recognize the extent and scale of the foreclosure crisis,” stated the group’s report.
To view the April 28 report, follow this link. The February 2008 report can be viewed here.
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