Interest Rate Roundup

Friday, January 18, 2008

Loan modification/repayment plan updates

Wondering how the "HOPE NOW" effort to help borrowers avoid foreclosure is going? Or wondering how many borrowers are being helped? Some stats have been released over the past couple of days. Here's a statement (PDF link) from the alliance behind HOPE NOW, and here are some other figures (PDF link) from the Mortgage Bankers Association.


Nine of the largest servicers handling 4.1 million loans, or approximately 58% of
the outstanding subprime loans as of September 2007 provided the data. This
preliminary data on the subprime loan modifications and repayment plans

• The industry assisted 370,000 homeowners during the second half of 2007.
This includes 250,000 formal repayment plans and 120,000 modifications.

• Mortgage servicers were modifying subprime loans during the fourth
quarter at triple the rate of the third quarter.

• On an annualized basis, 10.4% of subprime borrowers were helped.

• 39% of delinquent borrowers were assisted in the second half of 2007.

And from the MBA:

"The mortgage industry modified an estimated 54,000 loans and established formal repayment plans with another 183,000 borrowers during the third quarter of 2007, according to a report issued today by the Mortgage Bankers Association. By comparison, foreclosure actions were started on approximately 384,000 loans, but of those foreclosures, 63 percent were cases where the borrower did not live in the home, the borrower did not respond to repeated attempts by the lender to contact them, or where the borrower failed to perform on a repayment plan or loan modification that was already in place."

Still, FDIC Chairman Sheila Bair said more needs to be done in a speech yesterday. Some specific comments:

"So, how's it going? Not as well as it should be.

"Moody's, the rating agency, says that at the end of September, just 3.5 percent of loans that reset in 2007 had been modified. That puts us way behind the curve going into the New Year. We have some 2 million loans to adjust, the bulk of them in 2008. Time is of the essence.

"We must see a pickup in the pace, and the sooner the better. It's like having your football team in the Super Bowl win the coin toss, but fumbling the ball on the kickoff and giving up a touchdown.

"You're behind at the get-go.

"To be sure, the loan modification program is no cure-all. It's part of a broader effort. But the true test of success will be whether industry can show progress in avoiding foreclosures. We'll be closely watching for progress.

"It is essential that industry reports, such as those being prepared for the states and Hope Now, show true progress. While no one likes reporting, given the current situation it's critical that industry show effective action to avoid unnecessary foreclosures.

"I urge servicers to cooperate in making these reports. It's in your best interest to do so. Working with Treasury and government regulators, the industry has tools to address this on its own. And the key is to quickly get borrowers who can afford their homes, into long-term loans they can afford to pay."

No doubt we'll hear more point-counterpoint on this issue over the coming weeks and months.


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