Foreclosure Prevention Strategies

The Mortgage Bankers Association released a report that indicated most foreclosures cost lenders and investors more than $50,000 each, or as much as 30 to 60 percent of the outstanding loan balance. Servicing expenses resulting from foreclosures include lost principal, interest and servicing fees; lender-paid taxes and insurance; property maintenance expenses; and collection costs.

In addition, MBA noted there are foreclosure legal costs, administrative fees, property restoration expenses and real estate commissions. Finally, losses are incurred when real estate owned is sold for less than the principal balance.

HOPE NOW reported that mortgage servicers provided 183,000 loan workouts during April — the highest number since launching the organization in July 2007. Nearly 1.6 million foreclosures have been averted since the program’s inception. Around 106,000 of April’s loan workouts were repayment plans, while approximately 77,000 were loan modifications.

The Federal Deposit Insurance Corporation and NeighborWorks America announced last week a series of one-day foreclosure prevention seminars in five high-foreclosure cities for support counselors, bankers, real estate professionals, and others involved in foreclosure outreach efforts. The seminars will provide an overview of the foreclosure process and how to access the mortgage industry.

NeighborWorks issued a press release indicating it launched an online learning center and is offering as its first course an introduction to foreclosure intervention counseling. NeighborWorks also expects to offer two online courses, including one to help strengthen non-profit board members’ abilities to guide their organizations and another introductory Federal Housing Administration course.

Freddie Mac said it is joining forces with Virginia’s governor and the Virginia Foreclosure Prevention Task Force in June to offer free mortgage clinics that will help delinquent borrowers in the state avoid foreclosure. In addition to general foreclosure prevention information, individual foreclosure counseling sessions will be offered with certified housing counselors trained in loss mitigation and foreclosure prevention.

Fidelity Reverse Mortgage said Tuesday it is offering a reduced-cost reverse mortgage program for some senior borrowers who are facing foreclosure and have completed a reverse mortgage loan with the Denver-based company.

“A reverse mortgage may be a great solution for many senior homeowners facing foreclosure,” Fidelity Chief Executive Officer David Miner said in the press release. “Under our relief program, Fidelity will identify a senior homeowner to be reimbursed for some of the costs associated with their obtaining a reverse mortgage, such as origination, counseling and appraisal fee.”

The Mortgage Relief Fund launched in December with the participation of five banks has now grown to 50 participating banks, the Federal Reserve Bank of Boston and the Massachusetts Bankers Association announced today. The statement also noted that deteriorating conditions in many parts of New England have prompted the group to expand from helping just high-rate subprime borrowers to aiding prime borrowers with negative equity.

The Philadelphia Mortgage Foreclosure Protection Plan was announced by the city’s mayor on Wednesday to deal with an expected 8,500 foreclosures this year. The plan includes free counseling services and a hotline for delinquent borrowers and those facing a foreclosure sale. In addition, the city has budgeted $2 million in its fiscal 2009 budget for counseling, legal services and the Pennsylvania Housing Finance Agency’s HERO program, which enables subprime borrowers to refinance.

NJ 211 announced delinquent New Jersey borrowers can find state and local resources that provide assistance, as well as a wealth of foreclosure prevention resources, at its Web site. When borrowers call 2-1-1 from a New Jersey telephone, client resource specialists who have been trained to navigate the vast and often complicated network of social services provided by the state take the opportunity to discuss other cost-saving programs with them.

New Yorkers for Responsible Lending, a coalition of 141 groups, said it is pressing the state’s governor and legislature to pass strong and comprehensive foreclosure prevention legislation before the legislative session ends in June. One bill supported by the group would create a mechanism that would encourage lenders and borrowers to try to work things out early in the foreclosure process.

MBA issued a statement applauding Minnesota’s governor for vetoing the Minnesota Subprime Borrower Relief Act of 2008. The trade group explained that the moratorium proposed in the act raises constitutional questions and would only prolong foreclosure problems.

“Delaying a foreclosure subjects a borrower to accrued interest, taxes, insurance premiums, foreclosure costs and many other fees,” the statement said. “This puts borrowers into a deeper financial hole when the deferment period ends, making foreclosure an ultimate inevitability, rather than a threatening possibility.”