Two reports have been released on foreclosure prevention detailing recent activity and projecting the impact of proposed legislation. Meanwhile, resources for delinquent borrowers continue to expand.
The State Foreclosure Prevention Working Group released the report, Analysis of Subprime Mortgage Servicing Performance. The group said it was formed last summer by state attorneys general and state banking regulators to work with servicers of subprime mortgage loans to identify ways to work together to prevent unnecessary foreclosures.
Despite meeting with the 20 biggest subprime servicers late last year, the group said just 13 servicers representing 58 percent of the market provided data, creating a somewhat weak database to analyze. On the advice of the Comptroller of the currency, Chase and Wells Fargo were among those to decline. Chase, along with Washington Mutual, also declined to provide the data because of their participation in the HOPE NOW Alliance's data project.
Subprime servicers operate under varying models that include a mix of companies that service only self originated loans, service loans for others, service only subprime and also service prime. But the type of model didn't appear to create any obvious differences.
Hybrids accounted for 31 percent of the nonprime market, based on available data from October for 5.1 million subprime and Alt-A loans. About 31 percent of subprime hybrid adjustable-rate mortgage borrowers are becoming delinquent before payment resets, indicating it is not the resets that are driving foreclosures.
"For example, over 21% of homeowners who will not experience their first payment reset until the third quarter of 2009 are already experiencing difficulty in making their mortgage payments," the report stated.
As of Oct. 31, 556,578 nonprime loans were at least 90 days delinquent, while the 30+ delinquency rate was 1.1 million mortgages for 21.53 percent, the group reported. Just 2 percent of delinquent loans had been modified during the prior year and over 250,000 loans were in the foreclosure process.
About 70 percent of seriously delinquent borrowers have no plan for recovery due to their lack of interaction with servicers, the group said. As refinance options have dried up, most loans that were brought current -- 73 percent -- were due to the borrower catching up on the past due amounts. Modifications accounted for 9 percent of loss mitigation, while repayment plans represented 10 percent and refinances accounted for 4 percent. More than 150,000 loans were in the modification process at the end of October.
Mortgage Bankers Association Chairman Kieran P. Quinn saw the reports findings as positive.
"The report released today by the State Foreclosure Prevention Working Group corroborates other evidence that lenders are increasingly helping borrowers who are falling behind on their mortgage payments," he said in a statement yesterday. "This is the same trend we clearly see in the more recent data collected by the HOPE NOW alliance."
But MBA was criticized for its position that mortgage rates would increase for all borrowers if bankruptcy judges were allowed to modify mortgages, as is being proposed in House bill H.R. 3609.
"There is no empirical evidence that supports a conclusion that permitting either strip-down or other forms of modification of principal home mortgage loans in bankruptcy would have more than a minor impact on mortgage interest rates or on home ownership rates," Georgetown University law professor Adam J. Levitin and Ph.D. candidate and Joshua S. Goodman said in a press release. "Statistically there is a zero percent chance that the MBA's 150 basis point claim is correct."
The two wrote that while bankruptcy judges can modify mortgage on vacation homes, investor properties, and multifamily residences, bankruptcy laws currently prohibit modifying loans on primary single family residences. They said a study they conducted found the nature of the pending legislation from the House and Senate make it even less likely that there will be interest-rate implications if it is passed.
A blogger claims to have prevented 18 foreclosures in the six months since launching his Web site.
LoanSafe.org founder Moe Bedard announced that after blogging about the 18 borrowers who had unsuccessfully spent up to four months, forum entries from homeowners, attorneys, foreclosure prevention and loan modification experts enabled the borrowers to achieve modifications.
MyClosingSPACE.com, which claims to be the nation's first online, direct-to- consumer, full service title insurance and closing services agency, announced a new foreclosure resource center. The resources include links to federal, state and non-profit Web sites dealing with foreclosure prevention.
Freddie Mac created a Spanish version of its foreclosure prevention video published on YouTube.com. The video warns borrowers about a widespread form of foreclosure fraud.