Little Progress In Foreclosure Prevention Measures

February 13th, 2008

At the state and federal levels there have been efforts to grapple with the foreclosure problems but so far no positive results are tangible. Last summer the Sate Foreclosure Prevention Working Group, an organization with multiple targets, got started to work in tandem with sub-prime mortgage loan servicers to encourage modification of loans and other like measures to bring down the number of foreclosures. The report presented by the Attorney General Tom Miller paints a negative achievement. Seven out of ten of the seriously at risk borrowers are not in line regarding mitigation plans. The link between the borrowers and the servicers remain a gray zone. The servicers are showing a better infrastructure build up for tackling the issue but the gap between numbers needing help and those actually getting it are increasing.

Among those who have approached their servicers for loan modification slightly less than half have benefited. Servicers are opting more for long term arrangements rather than forbearance of loans.

Another opinion is that many borrowers are being foreclosed upon even before rates have increased. This indicates that there is something questionable about the loan agreement. This matter of hybrid ARM loans needs immediate attention before further rise in foreclosure numbers confuse the matter.

In October it was the borrowers who pulled the brakes on foreclosure numbers by coming forward and becoming current on their payments. This however cannot be taken to be the trend and might be only a temporary phenomenon.

Hitherto the refinance option was typical in cases of sub-prime loans that became delinquent. But today there is no such possibility of refinancing as the market value of properties have gone down to unforeseen levels.

The motley group comprises of the State Attorney General as well as representatives of state and federal banks to operate a uniform data format to find out the real impact of measures on foreclosure numbers. Without consistent data further work schedules cannot be worked out properly. Unfortunately exact data is not forthcoming. For instance only 13 of the 20 servicers were cooperative in October 2007. These servicers comprise of 58% of the sub-prime lenders. Providing data is voluntary and as such apart from requests nothing can be done to enforce it. But the group is hopeful that in the near future there will be more co-operation and they will be able to get monthly reports.