State Group Reports Six of 10 Borrowers Not Involved in Loss Mitigation Efforts
January 25, 2010 The State Foreclosure Prevention Working Group is encouraging servicers to step up foreclosure mitigation citing a significant outpacing of delinquent loans over outreach and loss mitigation.
The Working Group, which is comprised of 12 state attorneys generals, state regulators and the Conference of State Bank Supervisors, is warning that there will be an acceleration of foreclosures unless improvements are made in foreclosure prevention efforts. The group's new report indicates that six out of 10 seriously delinquent borrowers are not involved in loss mitigation efforts, and those borrowers that are seeking a modification are caught up in a delayed and backlogged system.
The Working Group found that most modifications result in payment reductions, but principal reductions remain rare. Further, prime loans are increasingly driving the rising delinquency rates. The group makes several recommendations in its report including improved loss mitigation programs that prioritize principal reduction in areas of significant home price declines and increased transparency and a reduction of paperwork in the federal Home Affordable Modification Program (HAMP). Further, the group says servicers should pay particular attention to reforming payment option ARM loans and that the states should consider expanding homeowner counseling and temporary foreclosure mediation programs.
The State Foreclosure Prevention Working Group has published three prior reports on mortgage issues. You can read more about this report at this link.