Mortgage Daily

Published On: October 23, 2007
Massive Wave of Foreclosure Relief Programs

Recent foreclosure prevention activity

October 23, 2007

By COCO SALAZAR

photo of Coco Salazar
Countrywide Financial Corp.’s commitment to modify $16 billion in mortgages wasn’t the only big recent foreclosure prevention news. In addition to activity by several home counseling organizations, multiple states have developed programs and legislation while members of Congress have introduced bills designed to provide relief to borrowers facing foreclosure and renters whose landlords lose their properties to foreclosure.

MortgageDaily.com launched a new foreclosure prevention resource center. In addition to multiple Web site addresses for foreclosure tracking, the resource center provides links and some phone numbers to dozens of foreclosure prevention services, agencies and government organizations.

Advanced Real Estate Concepts LLC created rapidforeclosuredata.com to provide foreclosure information at first indication of default. Advanced says it provides such pre-public record data several months ahead of the vast majority of foreclosure list services and sells each data set only once to subscribers.

Ransom Enterprizes LLC announced it has received a nationwide surge in requests, most of them from mortgage brokers and loan officers, to receive training in starting foreclosure consulting businesses. Ransom suspects the rise may be due to mortgage professionals seeing consulting as added value to their service offerings while former mortgage insiders may view it as a new career opportunity.

Mortgage Default Assistance touted a large number of mortgage modifications its professional counselors and loss mitigation specialists have been able to achieve for borrowers. The company says it works out plans with the various parties involved in the foreclosure process to provide a custom solution for borrowers.

A $15 million grant from investment management firm Paulson & Co. Inc. enabled the Center for Responsible Lending to create the Institute for Foreclosure Legal Assistance, which is expected to provide legal representation to 5,000 families facing foreclosure because of abusive subprime mortgages. The majority of the funds will be grants to support direct legal assistance to borrowers in 10 or more states but there will also be funding and training for foreclosure prevention organizations. The institute, which will be managed by the National Association of Consumer Advocates, will be managed should be in operation within a few months, the center announced.

Counselors at the Homeowner’s HOPE Hotline fielded nearly 60,000 calls in the third quarter — double the volume in the previous quarter and more than a 10-fold increase from the same period a year earlier. Year-to-date, the 100,000 calls made to the national, 24 hour foreclosure help line has shattered call records set last year. Additionally, the number of completed mortgage counseling sessions with borrowers jumped to nearly 25,000 from 15,000 in the second quarter, announced the hotline’s manager Minnesota-based Homeownership Preservation Foundation.

Michigan Gov. Jennifer M. Granholm today announced a new toll-free, foreclosure help hotline, 866.946.7432, that will be operated by the Michigan State Housing Development Authority. The hotline will direct homeowners to a housing counselor in their county or to technical experts in the MSHDA homeownership division.

The U.S. Department of Housing and Urban Development assured mortgage bankers at a recent convention that the Bush Administration’s foreclosure prevention initiatives, including FHASecure, are achieving the effect of keeping more families in their homes. Among the efforts, the FHASecure and other FHA products are expected to help 240,000 families in the next fiscal year and increased funding for housing counseling by 200 percent since 2001 has enabled more than $44 million in grants to over 400 state and local efforts, HUD announced.

The Congressional Hispanic Caucus Institute and NeighborWorks America will present to Congress on Thursday the results of eight national focus groups and make recommendations on how to prevent Latino home foreclosures.

U.S. Treasurer Anna Escobedo Cabral will visit Cleveland, Ohio, Thursday to discuss with borrowers the mortgage financing services and options counseling agencies offer to prevent foreclosures. Cabral will deliver the advice at the South Elyria Neighborhood Development Corp. Annual Education Luncheon.

ForeclosureRadar reported that a total of 8,818 properties in California were sold at auctions during September, which, although lower than 9,477 in August, showed foreclosure activity increased on an average daily basis after adjusting for fewer recording days in the month.

The Minnesota chapter of the Association of Community Organization for Reform Now announced it recently rallied in front of Minneapolis City Hall, calling for a three-month freeze on foreclosures. Three city council members joined ACORN, while at least four others have expressed support of ACORN’s proposal.

Federal Deposit Insurance Corp. Chairwoman Sheila C. Bair’s proposal to freeze hybrid mortgages at the introductory rate gained support from the California Reinvestment Coalition, Woodstock Institute, Neighborhood Economic Development Advocacy Project of New York and Community Reinvestment Association of North Carolina, according to an a news release.

Mortgage brokers are not to blame for the meltdown in the subprime mortgage market, according to the National Association of Mortgage Brokers. The group cited a study by the Government Accountability Office that blamed the rise of securitization, which shifted risk from lenders to investors and resulted in too much liquidity.

“Simply put, blaming only mortgage brokers or any other one segment of this industry for this complex meltdown doesn’t hold water with the facts,” the group said in a statement.

On Thursday, Massachusetts Gov. Deval Patrick unveiled a five-point plan intended to prevent foreclosures that includes neighborhood stabilization pilot programs in six cities, consumer outreach and education, and coordination to increase utilization of MassHousing’s loan refinancing program.

One of the two other initiatives under the plan calls for participating lenders to provide $5,000 for each ARM loan they foreclose on to help borrowers who received counseling pay rent and moving expenses. To date, Option One Mortgage Corp. and the Massachusetts Credit Union League, Inc. have agreed to provide funding for such transition resources. The remaining initiative calls for lenders and servicers to help subprime borrowers modify or refinance into affordable loans, and failing that, prevent foreclosure by allowing borrowers to sell their properties before a lender seizes or allow a deed in lieu of foreclosure.

On Monday, H.R. 3915, or The Mortgage Reform and Anti-Predatory Lending Act of 2007 was introduced. The bill includes protections for renters of foreclosed homes.

Sen. Norm Coleman, R-Minn., last week introduced the Home Ownership Mortgage Emergency Act to allow borrowers who are 60 days delinquent to withdraw up to $100,000 from their retirement accounts, without paying the 10 percent penalty, through 2009 in order to refinance or avoid foreclosure. No income tax would apply as long as the withdrawals are repaid within three years. Currently, the 10 percent penalty applies for early retirement distributions and taxes are waived for distributions from Individual Retirement Accounts for first-time borrowers only, a news release stated.

The Mortgage Bankers Association applauded Coleman’s delinquency relief bill, which reportedly requires that the delinquent mortgage is owner occupied and for the borrower to have a maximum adjusted gross income of $114,000, or $166,000 for joint filers.

MBA and the Ohio Mortgage Bankers Association, however, do not support the Ohio Department of Commerce’s Compact to Help Ohioans Preserve Homeownership proposal, which was issued to servicers on Oct. 9. In a letter to the department, the two groups expressed concern over subprime lending being solely defined by credit scores and other ambiguous language.

The groups recommended that the state instead encourage servicers to commit to the HOPE NOW Alliance and Senate Banking Committee Chairman Chris Dodd’s principles, noting many of the nation’s largest servicers form part of these efforts that create a uniform, national approach to foreclosure prevention. As for a state-based approach, the groups recommended Ohio adopt measures similar to those made by Massachusetts in April, when the state’s governor directed the commissioner of the Division of Banks to seek voluntary delays from mortgage lenders, on a case-by-case basis, for borrowers who had filed a complaint with the division — as this program has assisted more than 1100 troubled borrowers.

Countrywide announced plans to launch an outbound calling initiative to refinance or modify up to $16 billion of its subprime loans facing a rate reset through the end of 2008.

A new special refinance unit will contact about 52,000 borrowers who are current on their loan to transition approximately $10 billion of mortgages into prime and FHA loans, or Fannie Mae and Freddie Mac’s expanded criteria programs. For those 20,000 borrowers who are current and unable to refinance, Countrywide will supplement an early notification letter by calling at least three months in advance of the reset and expects to modify about $4 billion in loans. For subprime borrowers who are delinquent as a result of a recent reset, the company is sending letters offering a pre-determined, pre- approved rate reduction that are expected to result in 10,000 or $2.2 billion in loans modified by yearend, Countrywide said.

So far in the year, Countrywide has reportedly helped over 40,000 borrowers stay in their homes through 20,000 loan modifications and other efforts.


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