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Foreclosure News | Foreclosure Resources

Foreclosures Overwhelm Servicers

Group releases report based on January data

April 23, 2008

By MortgageDaily.com staff

A new report found that rising delinquency is offsetting increasing efforts by overwhelmed servicers to prevent foreclosures.

Those were the findings from Analysis of Subprime Mortgage Servicing Performance announced Tuesday by the State Foreclosure Prevention Working Group. The report analyzed subprime servicing data from January 2008.

Data was collected from 13 of the largest 20 servicers that represent around 60 percent of subprime mortgage loans serviced.

The group was formed in September 2007 to work with subprime servicers to reduce foreclosures. Included in the group are attorneys general from Arizona, California, Colorado, Iowa, Illinois, Massachusetts, Michigan, New York, North Carolina, Ohio and Texas. In addition, banking regulators from New York and North Carolina are among the ranks.

"Industry measures to keep homeowners out of foreclosure are barely keeping pace with the rising rate of homeowners in trouble," the announcement stated. "The number of borrowers in loss mitigation has increased ... but those gains have been matched by an increasing level of delinquent loans."

The group released a report in February that analyzed data from October 2007. That study found seven out of ten seriously delinquent loans were not in any sort of work-out process. The latest report indicated the share hadn't changed and, "in major respects," the data was unchanged from October to January.

"The number of borrowers in loss mitigation has increased, but it has been matched by an increasing level of delinquent loans; thus, the relative percentage has remained about the same," the group wrote.

Servicers' loss mitigation departments are overwhelmed with the current workload, according to the study. Nearly two-thirds of loss mitigation efforts are not completed within one month of starting.

"The burgeoning numbers of delinquent loans that do not receive loss-mitigation attention are clogging up the system on their way to foreclosure," the authors wrote. "We are concerned that servicers overall are not able to manage the sheer numbers of delinquent loans."

The report noted that many servicers are moving toward loan modifications and away from repayment plans on borrowers who do receive loss mitigation help.

The report indicated "millions of unnecessary foreclosures" will not be prevented as a result of inadequate efforts.

The group called on more servicers and the Comptroller of the Currency to join the 13 servicers who are sharing data. It also called for a more systematic approach to replace the more labor-intensive case-by-case loss-mitigation approach.

read full Analysis of Subprime Mortgage Servicing Performance report from April 2008

read full Analysis of Subprime Mortgage Servicing Performance report from February 2008

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