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Groups Criticize Servicers, States Pass Foreclosure Laws

Recent foreclosure prevention activity

July 16, 2008


The governors of three states announced new programs and legislation designed to reduce foreclosures. Meanwhile, mortgage servicers were criticized by two groups who claim too little is being done to prevent foreclosures.

But first, Just Price Solutions announced Tuesday that it provides an automated analysis of loss-mitigation solutions for borrowers, loan servicers and lenders. The offering enables real-time collaboration between loan counselors and servicers to determine the most efficient and best solutions.

Just Price is the nonprofit technology subsidiary of Neighborhood Housing Services of America, which funds and purchases loans made to low- and moderate-income borrowers.

The PMI Group Inc. reported last week that it has reviewed and approved 3,217 loan workouts during the first six months of this year, with more than half of the workouts preventing a foreclosure. Just under half of the workouts resulted in a short-sale, loan assumption or deed-in-lieu.

The Negotiated Solution is soliciting delinquent borrowers to purchase its $249 course about negotiating a short sale with their lenders. The company said the course was created by lenders.

"The primary objective of The Negotiated Solution is literally to help you level the playing field with your lender," the company said in a promotional piece. "This means to empower you with the knowledge and strategy to help you accomplish your objective and to also protect you from your lender."

HOPE NOW's report earlier this month indicating mortgage servicers prevented 170,000 foreclosures during May was quickly blasted by the Center for Responsible Lending.

"Once again, a closer look at HOPE NOW's data shows these numbers greatly overstate the help being provided and that the foreclosure crisis continues to accelerate and overwhelm industry's voluntary attempts to renegotiate unaffordable home loans," Debbie Goldstein, executive vice president of CRL, said in a recent statement. "HOPE NOW servicers have been at this for a year now. Clearly they have failed. Delinquencies and foreclosures keep going up, and tens of thousands of loans 'fixed voluntarily by industry have already gone bad again.'"

Servicers were also blasted by the California Reinvestment Coalition, which issued its own statement indicating servicers and lenders are not working with borrowers who need loan modifications in order to keep their homes. That group cited a survey of 42 California mortgage counseling agencies that served 11,062 borrowers in April 2008 which found foreclosure is still the most common outcome for delinquent borrowers despite lenders' promises to help borrowers.

The survey reportedly found servicers are not responsive, modifications are not occurring often enough and borrower outreach is poor. The group criticized the lack of principal write downs and the impact on tenants.

Massachusetts Gov. Deval Patrick announced earlier this month A Home for the Brave, a program developed by MassHousing for the state's veterans. Among the benefits is a mortgage insurance program that will make a veteran's monthly payment for up to six months if he or she becomes unemployed or deployed on active duty. Fannie Mae is providing a grant for closing cost assistance.

California Gov. Arnold Schwarzenegger signed into law SB 1137. The legislation requires lenders to contact borrowers prior to foreclosing and explore restructuring options, a statement last week said. It also increases the amount of time that tenants have before being evicted when the property they are renting is foreclosed upon.

"I am proud to announce today that we are giving Californians one more tool to help them stay in their homes -- without government subsidies," Schwarzenegger said in the statement.

Pennsylvania's Gov. Edward G. Rendell signed five mortgage-related bills into law last week, a press release said. Among the bills was S.B. 486, which requires that a copy of every foreclosure notice be sent to the Pennsylvania Housing Finance Agency so that foreclosure activity can be monitored in real time. Prior to the new law, foreclosure notices were only sent to the borrower and filed in their home county.

"With this data, state government will be able to identify potentially troubling trends, making it possible to intervene more quickly and strategically to help save peoples homes," the statement said. "These new laws are crucial steps forward ... but they are one component of a complex strategy to combat lending abuse and fraud."

Sam Garcia worked in mortgage lending for twenty years prior to becoming publisher of MortgageDaily.com.

e-mail: [email protected]

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