The Conference of State Banking Supervisors issued a press release stating that industry attempts to prevent foreclosures are insufficient.
The release stems from the second report entitled “Analysis of Subprime Mortgage Servicing Performance” issued by the State Foreclosure Prevention Working Group (led by 11 states attorneys general and banking regulators, and the CSBS). The report includes data from subprime servicers for the period from October 2007 to January 2008. A prior report was issued February 7, 2008.
The report acknowledged that the number of homeowners receiving loss mitigation help has increased. But so have the number of homeowners delinquent on payments. Private initiatives are “barely keeping pace” CSBS noted.
CSBS notes the following major findings from the report:
Seven out of ten seriously delinquent borrowers are still not on track for any loss-mitigation outcome. The number of borrowers in loss mitigation has increased, but it has been matched by an increasing level of delinquent loans; thus, the relative percentage has remained about the same. Given creative servicer outreach efforts and increased public awareness of the HOPE Hotline during Oct.-Jan., this large gap suggests a more systemic failure of servicer capacity to work out loans.
Data suggests that servicers’ loss-mitigation departments are severely strained in managing the current workload. The report noted that almost two-thirds of all loss-mitigation efforts started are not completed in the following month. We are concerned that servicers overall are not able to manage the sheer numbers of delinquent loans. Data suggests that the burgeoning numbers of delinquent loans that do not receive loss-mitigation attention are clogging up the system on their way to foreclosure. We fear this will translate to increased levels of vacant foreclosed homes that will further depress property values and increase burdens on government services.
Homeowners who do receive loss-mitigation help are most likely to receive some form of loan modification. The Group said such modifications are a solution that seems to offer better long-term prospects for successful resolution of problem loans. Many servicers are replacing their use of repayment plans in favor of loan modifications.
To solve the perceived problems, the report suggests that industry and state officials work on:
Developing a more systematic loan work-out system to replace the intensive, individual, “hands-on” loss-mitigation approach. Initial efforts to develop systemic approaches are far too limited to make a difference in preventable foreclosures. Without a systematic approach, we see little likelihood that ongoing efforts will make a serious dent in the level of unnecessary foreclosures. The Group will continue to work with servicers to promote systematic solutions to modify loans in a more streamlined and efficient manner.
Slowing down the foreclosure process to allow for more work-outs. Targeted efforts to slow down subprime foreclosures may give homeowners and servicers more time to find solutions to avoid foreclosure. Many states have enacted or are considering such measures, the report noted.
Mortgage Law Blog notes that “barely keeping pace” is still keeping pace. This would seem to be an accomplishment if the numbers of delinquent borrowers continue to surge as the report suggests. This is not to suggest that industry sit on its hands, but the industry’s side of the story continues to be lost in the maelstrom.
The Ohio AG, among others, will speak at the Mortgage Bankers’ Association’s Legal Issues and Regulatory Compliance Conference next week. It will be interesting to hear the views presented.
For a copy of the CSBS press release, click here.
For a copy of the State Working Group’s reports, click here.
Tags: Association Activities, Conferences & Events, Consumer Protection, Foreclosure, Industry Involvement, Loan Modifications/Workouts, Loan Servicing, Lobbying, Loss Mitigation, Mortgage Banking - General, Regulations, State Enforcement, State Regulation by the Editor
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