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Massive Foreclosure Prevention Efforts Underway

Recent foreclosure prevention activity

August 19, 2008


Members of Congress are prodding servicers to hold off on foreclosures while new legislation is implemented, while a group of nonprofits is working to ensure foreclosure funds designated by the new law are put the highest and best use. In Chicago, the price of holding a vacant property rose, and the cost for foreclosure consultation from a Phoenix attorney fell. Two firms have automated the process of identifying foreclosure prospects and recommending solutions.

VendorScape Loss Mitigation has been launched by First American Default Technologies, according to a statement today. The new offering analyzes the property, the borrower's financial condition and answers from a rules-based intelligent borrower interview to determine available work-out plans. It also enables electronic ordering of third-party loss mitigation services such as broker price opinions, documents and credit reports.

"The solution leverages the VendorScape platform to improve coordination between all parties, streamline processes, reduce investor losses and create the best case workout solutions," First American said. "Clients can configure custom business rules that extend beyond standard investor guidelines."

An eligibility engine deployed by LenderLive Network Inc. provides a preliminary indication of the homeownership preservation programs that may be available to borrowers in a servicing portfolio, a press release Monday said. The new offering searches and analyzes a pool of loans for workout options to determine the alternative loan product or loan modification most appropriate.

An EarlyAction program from LenderLive provides counseling services for identified borrowers to determine the level of risk of prepayments or defaults, complete full financial assessments and qualify borrowers for alternatives.

Citigroup released a report last week indicating its loan modifications increased 27 percent from the first quarter to the second quarter. On loans with FICO scores less than 620, modifications soared 71 percent. Second-quarter loss mitigation successes outnumber foreclosures completed by more than four-to-one, while total loss mitigation solutions increased by 10 percent from the first quarter.

Completed foreclosures and loans in loss mitigation represented just 1 percent of Citigroup's servicing portfolio as of June 30. Delinquency of at least 90 days was 2.43 percent. And while completed foreclosures increased 6 percent from the first quarter, new foreclosures filed saw a decrease.

BankUnited Financial Corp. said Friday that it created a mortgage assistance program to refinance thousands of its borrowers with option adjustable-rate mortgages during the next six months. The biggest share of borrowers for the program are in Florida. The program includes waived pre-payment penalties, minimal modification fees and a multiple loan choices -- including traditional mortgage products and government agency loans.

The Federal Reserve Bank of Chicago announced yesterday the launch of an online foreclosure resource center. The center, which is designed for borrowers and community groups, consolidates information about available assistance already provided by the Chicago Fed.

The City of Chicago passed an Amended Vacant Property Ordinance on July 30 that goes into effect on Sept. 28, Pierce and Associates said in a statement. The new ordinance allows the use of plywood to cover doors and windows for the first six months that a property is vacant unless it is burglarized, in which case either steel panels would be required or doors and windows would need to be working along with an active security service.

After six months, vacant properties will be required to have lighting at entrances and exits from dusk until dawn. Fees to register vacant properties will rise to $250 for six months and can escalate by $250 for each six-month period thereafter.

Harper law PLC is offering a $40 half-hour consultation for delinquent Arizona borrowers facing foreclosure, a news release last week indicated. The Phoenix-based firm said it plans to schedule many of the consultations on evenings and weekends in order to meet anticipated demand.

The National Alliance of Community Economic Development Associations issued a statement last week voicing concern that sparsely populated areas with high foreclosure rates benefit from the $3.9 billion in Community Development Block Grants that are part of the recently enacted H.R. 3221, The Housing and Economic Recovery Act of 2008. Other areas of concern include nonprofits that intend to flip foreclosed properties, mandatory home counseling for buyers, due diligence funding and properly priced development fees for nonprofits.

"NACEDA's membership is concerned that funds be administered fairly and with careful consideration, as they recognize the importance and difficulty of this undertaking," Jane DeMarines, executive director of the group, said in the statement.

NeighborWorks America last week said it held a foreclosure prevention workshop at Gillette Stadium in Foxborough, Mass., in partnership with the HOPE NOW Alliance, the Federal Reserve Bank of Boston and the New England Patriots Charitable Foundation. The event included 40 nonprofit foreclosure counselors working directly with 20 national mortgage lenders.

House Financial Services Committee Chairman Barney Frank along with committee members Maxine Waters, Mel Watt and Brad Miller issued a letter last week to 13 of the biggest mortgage servicers and six mortgage-related trade groups strongly urging holding off on foreclosures during the next several months on borrowers who might potentially qualify for the new FHA rescue program that is getting under way.

The letter also asked servicers to indicate whether they plan to analyze which borrowers might qualify for the program over the next few months; whether they plan to make the principal reductions needed for qualification for the Hope for Homeowners program; and if their servicing practices provide that a previous loan modification would not disqualify a borrower from the principal modifications.

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

e-mail: [email protected]

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