Mortgage Daily

Published On: June 28, 2007
Government, Groups Prepare for Foreclosures

Recent foreclosure program activity

June 28, 2007


photo of Coco Salazar
States, as well as federal agencies, ratings agencies and consumer advocate groups, have been busy preparing to mitigate expected foreclosures.

Several Ohio lawmakers met in the nation’s capital Wednesday to discuss the “turmoil” in the housing market, including what caused the foreclosure crisis and possible solutions, according to a congressional report filing by Ohio congressman Paul Gilmor.

Among the concerns expressed were that borrowers’ debt is growing as they refinance mortgages to pay off credit card balances, and that many do not know the terms of the loans and are wary of efforts to assist with mortgage troubles. Encouraging greater financial literacy, improving tax treatment for borrowers who refinance to remain in their homes, and modernizing the Federal Housing Administration loan process were among the solutions offered.

Last week, about 150 attorneys in Massachusetts attended a two-day training session held by the state’s attorney general and several bar and advocacy groups. The attorneys committed to take on at least one pro bono case of legal assistance to borrowers facing foreclosure. The formation of a pro bono attorneys group is part of a multi-faceted plan to address the state’s current “foreclosure crisis,” which is further compounded by many borrowers’ inability to retain qualified legal counsel to represent them in foreclosure proceedings, an announcement from the attorney general stated.

The Idaho attorney general’s office issued an announcement advising borrowers facing foreclosure to be wary of fraudulent “foreclosure rescue” scams. The office urged borrowers to become informed about their options. The warning followed complaints from consumers who unsuccessfully used “foreclosure rescue” companies in an attempt to avoid foreclosure.

The Association of Community Organizations for Reform Now announced it recently met with Federal Reserve Board Chairman Ben Bernanke to discuss ways to curb the foreclosure crisis. The effort to rally borrowers at risk of foreclosure is an attempt to win major policy changes, including 1-year foreclosure moratoriums, increased government resources to fight predatory lending and enacting laws the help prevent bad practices and foreclosure rescue scams.

ACORN also recently released a set of reports, Home Insecurity, identifying 110 neighborhoods and counties with high foreclosure rates, the group said.

Foreclosure filings climbed last year to 1.2 million filings from 900,000 in 2005, ACORN reported. And out of all states, Nevada had the largest percentage increase in foreclosures — 172 percent.

The Federal Trade Commission released Mortgage Payments Sending Your Reeling? Here’s What to Do, according to an announcement. The publication explains different mortgage programs and what borrowers can do if they fall behind on payments, as well as how to avoid default, foreclosure, and foreclosure scams.

Meanwhile, Freddie Mac said it enhanced its CreditSmart multilingual financial literacy curriculum through new material that focuses on homeownership preservation, including foreclosure prevention. The tool is designed to help consumers build and maintain better credit.

Standard & Poor’s Ratings Services is proposing guidelines about loan modification practices and the manner of reimbursement of capitalized loan amounts in residential mortgage-backed securities. Among the key aspects of the proposal is that S&P may factor any Loan Modification Limit or potential loan modifications into its analysis when it reviews the proposed structure and credit support at the onset of the transaction. The agency is seeking comments by July 1.

The Pew Charitable Trusts provided a two-year investment of $1 million to the Center for Responsible Lending in an effort to curb abusive subprime home loans by strengthening underwriting standards, including verifying a borrower’s income and making sure borrowers have the ability to repay the mortgage after scheduled rate increases. Considering more than half of subprime loans are made by lenders that are not subject to pending guidance by federal banking and credit union regulators, the center will use Pew’s support to urge other policy makers to adopt basic standards to protect all subprime borrowers.

The Calvert Foundation, which allows investors to target their dollars to support affordable-housing nonprofits in their regions, recognized five of the community-based organizations it supports in the fight against predatory lenders and mortgage foreclosures. Self Help Enterprises in Visalia, Calif.; Manna, Washington, D.C.; Federation of Appalachian Housing Enterprises, Berea, Ky.; Boston Community Capital, Boston, Mass.; and McAllen Affordable Homes, McAllen, Texas, were the honorees. LLC announced that it will be featured on CNN’s Headline News in a segment on “Avoiding Home Foreclosure,” as part of a series on family finance. The segment “will continue to raise awareness of a growing trend in foreclosures across the nation,” as it covers why foreclosures have dramatically increased over the last few years and how the foreclosure prevention foreclosure prevention and consultation service is helping troubled mortgage borrowers, according to a press release.

Another awareness initiative that will be getting air time is the national public service advertising campaign the Advertising Council, in partnership with Neighborworks America, will launch in July. The multi-media campaign is designed to prevent foreclosures by urging troubled borrowers to call a hotline that involves many of the country’s largest mortgage companies. The council’s announcement on the initiative noted foreclosures are estimated to exceed one million households this year and roughly half of delinquent borrowers avoid contact with their lender in hopes that the problem will vanish.

One of the companies supporting the campaign is SunTrust Mortgage, which announced its commitment to responsible lending gave it social responsibility to address the growing foreclosure problem and help borrowers stay in their homes regardless of whom their lender is.

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