As states scurry to beef up foreclosure prevention and assistance, one loss mitigation firm is warning that many mortgage servicers are not prepared to deal with the current volume of delinquent borrowers.
The Ohio Foreclosure Prevention Task Force released Monday a report with key recommendations to combat the increasing number of foreclosures in the state.
Among seven key suggestions to the Ohio governor were earlier actions by the borrower, expanded counseling and intervention, and increased servicer alternatives, according to the report. The task force also called for modification options, an improved state foreclosure process and stronger borrower protections.
An annual $10 million fund of public and private money could support financial assistance programs and a public awareness campaign that would encourage borrowers to seek help before missing a payment.
Every county in Ohio recorded an increase in foreclosure filings from 2005 to 2006, reaching the highest level statewide in 13 years, according to the report. Loss of income and medical problems were cited as frequently being precipitating factors, compounded by the numerous borrowers in adjustable rate mortgages facing resets.
Among the state's recent preventative measures are the more flexible guidelines for the Opportunity Loan Refinance Program. Last week, the Ohio Housing Finance Agency announced it expanded guidelines to allow more borrowers with certain credit issues to qualify and avoid foreclosure.
The changes to the program, which originally launched in April, will permit borrowers to have one 60-day late payment and two 30-day late payments in the last 12 months on their existing mortgage payment history. Plus, the maximum combined loan-to-value ratio permitted is 105 percent.
In Connecticut, where foreclosure filings were up about 100 percent annually in July, a task force is expected to soon complete a definitive analysis and recommendations regarding subprime lending in the state, including the number of subprime borrowers in foreclosure, according to a recent announcement by the state's department of banking.
In the meantime, state officials recently set up the Mortgage Foreclosure Assistance Hotline to help troubled borrowers in Connecticut receive advice and guidance on their loans.
"We want to do all we can to help people avoid foreclosure, and the hotline will provide people with information, materials, and contact information to help resolve their mortgage difficulties," Connecticut Governor M. Jodi Rell said in the department's announcement.
Zenta recently announced it is offering a "broad range" of default management services to enhance the operational effectiveness of servicers and attorney firms representing the residential mortgage default industry.
Zenta reported its services, which benefit from its global outsourcing capabilities using U.S.-based residential default experts, can help in early and late-stage collections, assistance and recommendations for loss mitigation options, managing foreclosure files from referral to sale of property, claim filing and analysis for investors and mortgage insurers, and default mortgage servicing consulting and training, among other things.
In an announcement touting its loss mitigation services, I Short Sale Inc. said there are cases in which loss mitigation specialists spend close to two hours on the phone just to pinpoint the right representative to speak with at a company.
"Trying to find a responsive individual with actual decision making authority in the banks has become increasingly difficult since the subprime debacle," I Short Sale said in the announcement. "Banks must act quickly to improve efficiencies; there needs to be set procedures within a single department handling the loss mitigation of delinquent borrowers."
While some lenders have slowly adapted to today's market by establishing infrastructures and making changes to handle loss mitigation, many still don't have the capabilities to handle the influx of delinquent borrowers, I Short Sale said, pinpointing that specialists have cited Wells Fargo Bank and American Servicing Co. as notorious for being the least receptive and having the most "lost faxes and paperwork."
On Thursday, the Association for Community Organization for Reform Now and foreclosure victims rallied at the offices of hedge fund Carrington Capital Management. The consumer advocacy group said it targeted Carrington because, unlike other servicers, they are refusing to even consider making loan modifications and are only offering payment plans.
The hedge fund launched in 2003 with $25 million from New Century Finance, ACORN noted. It sponsors over $23 billion in MBS and its recent purchase of New Century's loan servicing operation has put over 100,000 mortgages under its management.
An entity recently honored for its superior performance in foreclosure and bankruptcy, however, is Hughes Watters Askanase L.L.P. The Houston, Texas, company was one of six law firms that received a 2006-2007 Summit Award from Fidelity National Foreclosure Solutions, which recognized firms who maintained a "Comparable to Best in State" rating in foreclosure and bankruptcy for 12 consecutive months.
Meanwhile, recent inquiries to the Nebraska Department of Banking and Finance prompted the agency to warn borrowers of companies offering foreclosure rescue services. Many scams involve the rescuer taking ownership of a borrower's property after falsely promising to help save their homes through an arrangement in which borrowers lease and buy back the home at a later date, according to a news release.
The department advised borrowers to talk to licensed professionals, including lawyers, prior to signing any agreement and to steer clear from the rescuer if the terms sound to good to be true.
Over in Michigan, which holds one of the highest foreclosure rates in the country, State House Democrats recently announced a bill intended to strengthen consumer protections and crack down on predatory practices that "line mortgage lenders" pockets and lead to foreclosures with no tangible benefits to homeowners."
The Michigan Home Loan Protection Act, as it is dubbed, would ban lenders from making loans without requiring borrowers prove their ability to repay them. Among other things, it would also limit the size of fees charged for late payments and payoff statements, prohibit the financing of any hidden points and fees, prohibit prepayment penalties and require vulnerable borrowers to receive counseling from a certified third-party, according to the announcement.