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Foreclosure Prevention Activity Soars

Recent foreclosure prevention announcements

February 29, 2008


As hundreds of millions of dollars are poured into foreclosure prevention programs, public and private entities by the dozen are promoting products and services to help delinquent borrowers deal with pending foreclosures.

Fannie Mae said Wednesday its new HomeSaver Advance enables servicers to offer qualified borrowers unsecured loans to bring their mortgages current. Fannie expects the program to help it conserve capital by reducing the number of loans it has to purchase from mortgage-backed securities.

HUD reported Tuesday that its FHASecure program has enabled 100,000 refinances of subprime loans since September. Of the $45 billion in FHA activity from September 2007 to December 2007, HUD said over $13 billion was through FHASecure. About 300,000 refinances are expected through FHASecure by the end of 2008.

U.S. Rep. Kirsten Gillibrand (D-N.Y.) announced that the National Foreclosure Mitigation Counseling Program awarded $130 million to 130 organizations that counsel borrowers facing foreclosure. The funds are expected to assist an estimated 350,000-400,000 delinquent borrowers.

U.S. Sen. Harry Reid (D-Nev.) announced he was able to help increase the amount that Nevada will receive from the $130 million by inserting language in the Consolidated Appropriations Act of 2008 directing funds to high-foreclosure areas.

Iowa received a $1.5 million federal grant for foreclosure counseling services, the state's Attorney General Tom Miller announced yesterday. Iowa will launch a multimedia campaign to promote its 877.622.4866 hotline -- which has already taken in 8,000 calls and opened 700 cases since launching in September.

The Bank of America Charitable Foundation announced Thursday a $250,000 contribution to California nonprofits that specialize in foreclosure mitigation. The grants are part of a series of initiatives undertaken by Bank of America nationally.

The Golden State is seeing a bigger increase in foreclosures than most other areas of the country, with Notice of Defaults and Notice of Trustee Sale recordings spiking 303 percent in Northern California during January, Default Research reported. In Southern California, filings are up around 250 percent.

One of the recipients of BoA's donation, Springboard Nonprofit Consumer Credit Management, noted the $65,000 it will get will help it handle the rapidly increasing volume of borrowers it is counseling.

Response Analytics announced Tuesday its Distressed Portfolio Management service provides continuous portfolio valuations and optimal recovery rate recommendations matched to appropriate collection channels. The system helps servicers reduce foreclosures and increase cash flow.

XSell and SigniaDocs Inc. announced Monday an alliance that will enable quick loan modification for mortgage lenders. The companies are offering new Web-based tool that integrates into existing systems helps servicers identify borrowers who qualify for modifications or refinances then complete the transaction online. The system can reportedly be operational in just weeks.

The National Association of Independent Landlords said borrowers might avoid foreclosure by renting out their properties and moving to a less expensive home or apartment. The group said it can help prospective landlords find qualified tenants, report tenant payment histories to credit bureaus and collect rents electronically.

MortgageFirstRewards.com has outlined four steps delinquent borrowers can follow to avoid foreclosure. In addition to contacting the servicers, borrowers should gather and review their loan documents to determine whether the lender has made any errors. Military personnel may be able to halt a foreclosure under the Soldiers and Sailor's Civil Relief Act.

The Federal Foreclosure Assistance Center has been established to help borrowers who face foreclosure open up communication with servicers, according to an announcement today. The new service helps establish a timeline of events, a plan of action and potential alternative solutions.

You Walk Away is soliciting delinquent borrowers with little or negative equity. The company said, for $995, it can let borrowers know exactly how much time they have before eviction, help them get the foreclosure removed from their credit reports and identify lender mistakes that may delay a foreclosure.

U.S. Treasury Secretary Henry Paulson told the Economic Club of Chicago Thursday that some foreclosure prevention proposals from Washington would just be a bailout for investors, lenders and speculators, according to a transcript of his prepared speech. He explained that just because a borrower is in a negative equity position is no reason for the borrower to walk away. He noted 93 percent of mortgages are current while under 2 percent are in foreclosure.

A study announced Wednesday by FreedomWorks Foundation and conducted by Wharton School Associate Professor Todd Sinai suggests many recent congressional proposals targeting the subprime crisis "inappropriately reward people who made riskier decisions over those who made prudent decisions, exclude people who live in states that experienced an early economic downturn, benefit those with high incomes at the expense of others, and spread the costs of the program among all taxpayers or future borrowers."

Borrowers mostly in California, Florida, New York and Texas will disproportionately benefit at the expense of prudent taxpayers across the country, the group said.

The Federal Trade Commission announced Thursday it charged six businesses and three individuals with violations of the FTC Act, HOEPA and TILA. FTC said it seeks to stop the defendants from making high-cost, short-term loans secured by additional mortgages to borrowers in danger of foreclosures.

The group is accused of ignoring repayment ability in the extension of credit, saddling borrowers with 6-month balloon payments and negative amortization loans, and failing to make adequate disclosures. They also allegedly grossly understated annual percentage rates.

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

e-mail: [email protected]

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