More news on loan mods

Posted by steele in minnesota on December 29, 2008 at 06:52:31:

Published: December 28, 2008 3:00 a.m.

Despite help, many mortgages still delinquent

Renae Merle
Washington Post


WASHINGTON  A government-backed alliance of mortgage lenders said it kept 2.2 million homeowners out of foreclosure this year, even as a separate report showed that many of those people likely fell back into trouble.

The lender alliance, Hope Now, said it is on course to double the number of loan modifications it completes in 2009. But the group could not estimate how many of the homeowners it had helped fell back into delinquency  a problem rattling regulators and industry leaders.

Hope Now also said the recession could be a stumbling block to efforts to prevent foreclosures. About 40 percent of homeowners that call the industrys hotline have experienced a job loss or decrease in income.

Obviously borrowers who dont have jobs cant pay the mortgage, said John Courson, chief operating officer of the Mortgage Bankers Association, a member of Hope Now.

More than a year into the foreclosure crisis, industry and government leaders are still struggling to make loan modifications more effective. More than 50 percent of loans modified this year were delinquent again within six months, according to joint report last week from two federal bank regulators, the Office of the Comptroller of the Currency and the Office of Thrift Supervision.

There are problems with both industry and government programs. For instance, Hope for Homeowners, run by the Federal Housing Administration, has been criticized as too expensive and onerous to substantially reduce the problem.

I think we all believe that more efforts can be made by industry and government to help homeowners, said Tom Deutsch, deputy executive director of the American Securitization Forum. Ultimately the macro-economic conditions have made it a much more challenging environment.

The Treasury Department faces pressure to include loan modification programs in its request to Congress to release the second half of the $700 billion financial rescue package. The Obama administration should consider appointing a foreclosure prevention czar, said Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee. Loan modification programs have not worked well, but I think they have the potential to do a substantial amount, he said.

There have been some successes. The number of loan modifications initiated in the third quarter increased 13 percent from the previous quarter, according to the report from the bank regulators. Hope Now said its members are now more likely to perform more substantial types of loan modifications. And several lenders, including Citigroup and J.P. Morgan Chase, have announced their own programs.

Its complicated. Nothing is easy, but we are seeing better, improved results, said Faith Schwartz, executive director of Hope Now.

The industry is planning more programs to streamline the loan modification process next year and increase efforts to contact hard-to-reach homeowners, she said. Hope Now will release detailed data next year on the types of modifications being performed to better judge what works best and expand its efforts to try to help at-risk homeowners avoid foreclosure, Schwartz said.

Consumer advocates continue to push for more aggressive loan modification programs. For example, many distressed homeowners are unable to refinance into better loans because their home is worth less than what they owe. But many lenders are reluctant to lower the principal owed to make up for the difference.

Bank of America included principal reductions in a loan modification program it initiated earlier this year, and mortgage servicer Ocwen Financial performed thousands of principal reductions this year, accounting for 70 percent of the industrys efforts, according to a recent Credit Suisse report."


Steele

Steele V. Propp
Foreclosure Specialist/ Loss Mitigator
Bank Owned Property Division
Schatz Re

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