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World Among Hardest Hit CA Lenders

Foreclosure activity and prevention programs

April 16, 2008


A large financial services firm claims that it has had fewer than 25 foreclosures in its mortgage business. A projection that Northern California foreclosures have hit their peak was contradicted by another report that also indicated three prominent California lenders are being hit the hardest.

ING DIRECT said in a statement that it has only experienced 15 foreclosures in its mortgage history. It also announced Orange Mortgage, a hybrid-loan program with initial terms of five or seven years. Rate changes and term extensions are available with a flat charge.

Hope Now announced last Thursday that, from January of last year until February 2008, mortgage servicers have given loan workouts that have allowed for 1.2 million homeowners to remain in their houses. The data Hope Now obtained from the study also revealed that loan modifications for this year have been 48 percent of all subprime workouts -- more than double the rate of 2007 -- and servicers have already provided 309,700 workouts in the first two months of 2008.

The Colorado Foreclosure Hotline bolsters an 80 percent success rate, the Colorado Foreclosure Prevention Task Force announced Thursday. One-quarter of the counseling during the last quarter of 2007 was for those currently seeking foreclosure prevention counseling, while 14 percent was for sold property/pre-foreclosure sales. The data also revealed 20,363 calls were received by the hotline last year. Since the start of this year, the hotline center has already received more than 8,305 calls.

The Mortgage Rescue Fraud Act in Illinois -- which doesn't allow anyone to buy homes in foreclosure or homeowners to stay in those homes -- has forced Escape the Bank LLC to abandon helping delinquent borrowers stay in their home and, instead, counsel them on walking away from the property.

According to the Illinois Foreclosures Listings Service, pre-foreclosure filings on Chicago-area properties reached a record 15,000 in the first quarter, an 8 percent increase from the last quarter of 2007 and a 100 percent increase from this time just two years ago.

Notice of Defaults and Notices of Trustee Sales in Northern California jumped 4.6 percent last month, according to real estate and foreclosure data provider Default Research.

"For all practical reasons, the foreclosures in Northern California have bottomed out and will begin to recover throughout this year," Serdar Bankaci, founder of Default Research, said in the announcement. "Also, Northern California has seen a drop in unemployment in February, and a higher rate of employment means fewer mortgage defaults."

But the California Foreclosure Report from ForeclosureRadar paints a different picture. Last month, notices of default in the Golden State jumped 14 percent to 42,704, and notices of trustee sale soared 48 percent. However, foreclosure auction sales fell 6.5 percent to 15,833.

At a 32 percent discount off of loan value, Merced County saw the biggest discounts, FoeclosureRadar said. San Joaquin County had a 31 percent discount, and the discount in Monterey County was 29 percent. Wilshire Credit Corp. saw an average 43 percent discount on its sales -- the deepest of any lender. Next was World Savings, which Wachovia Corp. acquired with its purchase of Golden West Financial Corp., at 33 percent. Downey Savings and Loan followed, with 30 percent.

"March data indicates California's foreclosure crisis is accelerating and suggests that the normalization of the state's real estate market is still far from complete," the Discovery Bay, Calif.-based company stated. "The record jump in defaults last December are just now showing up in early April foreclosure sales, and the new record level of defaults this month won't begin to appear at auction until July."

The Federal Trade Commission issued an advisory opinion indicating that debt collectors on foreclosures are not guilty of a per se violation of the Fair Debt Collection Practices Act by talking about settlement options with buyers, a press release from the Commercial Law League of America said. The FTC finds it essential for those likely to undergo foreclosure to obtain the right information about the options available.

Pennsylvania Secretary of Banking Steve Kaplan commended the U.S. House of Representatives for its approval of mortgage reform bills that will deal with the latest lending practices that have led to the foreclosure crisis, a press release stated.

"Pennsylvania's laws have failed to keep pace with the evolving mortgage industry," Kaplan said. "This reform legislation will bring our laws up to date with the realities of the mortgage market and address specific practices that can cause serious financial harm to borrowers."

The U.S. Senate "compromised [its] goal of focusing on helping struggling homeowners facing foreclosure" with its compromised version of the Foreclosure Prevention Act, the Laborers' International Union of North America announced. The bill's "carry-back" provision allows for corporate homebuilders and Wall Street investors to get $25 billion in tax breaks through 2010, compared to the $9 billion designated to provide assistance to borrowers.

LIUNA, a large coalition of homeowners, labor, economic policy and community organizations, issued a press release Tuesday calling on the House to fix the Senate's bill.

But more government interference in the housing market would be bad, FreedomWorks Chairman and former House Majority Leader Dick Armey told the Conservative Opportunity Society at a meeting last Wednesday. He noted that "tinkering in the marketplace threatens the sanctity of contracts and will only produce uncertainty for borrowers and lenders alike, driving interest rates up, rewarding risky behavior, and doing nothing to help those negatively affected by the current crunch."

Vice Chairman of the Mortgage Bankers Association and President of Seattle Financial Group Robert E. Story Jr., CMB, said that, while he feels the bill H.R. 5579 to remove a hindrance to troubled debt restructuring for holders of residential mortgage loans can be beneficial, he is not quite certain the advantages "outweigh the potential harm the bill may cause the mortgage market overall," he said in a speech Tuesday, according to a news release.

He did, however, acknowledge the fact that the bill will legally protect servicers from litigation risk in certain situations of loss mitigation efforts, but he also expressed his doubts before the House Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises.

"We are concerned this bill may create investor uncertainty, similar to recent bankruptcy proposals, despite the care the drafters took in trying to balance the interests of investors and servicers," he said.

Natalie Merrill is a staff writer for MortgageDaily.com with a Journalism degree from Southern Methodist University.

e-mail: [email protected]

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