Efforts to aid beleaguered borrowers are still falling short as 70 percent of homeowners who are two months behind on their mortgages still aren’t getting help, a new report released Tuesday found.
Of those borrowers receiving help, only one in three completed a workout within 45 days. Slow assistance is partly why the number of homeowners facing foreclosure increased 16 percent, the State Foreclosure Prevention Working Group found in its survey of mortgage servicers.
The report, which examined delinquent loans from October to January, criticized the limited results of the Hope Now Alliance — a coalition of mortgage lenders and servicers backed by the Bush administration. The rate at which homeowners are getting help was unchanged from the group’s last report.
“Servicers are struggling to keep up with what they have, but they are getting more delinquent loans into the system,” said Mark Pearce, the North Carolina Deputy Commissioner of Banks.
Servicers completed 50,000 more loan modifications in January than last October, Pearce said, but the number of subprime and other exotic loans that were 90 days or more delinquent increased by 90,000.
“That doesn’t even account for the increase of delinquencies in prime loans,” Pearce said.
Faith Schwartz, executive director for Hope Now, said she hadn’t read the report. “But I always say there’s more to be done and we need to stay focused.”
The only bright spot in the report showed that servicers are modifying loan terms for more troubled borrowers, instead of offering the traditional forbearance and repayment plans, which many critics say aren’t successful, long-term solutions.
“Many of the borrowers here have reached a point where they can’t afford to make the full payment,” said Tom Miller, Iowa’s attorney general. “A forbearance or repayment plan only deals in the short-term, but these borrowers can’t pay the full amount long term.”
Loans made to borrowers with riskier credit have defaulted in increasing numbers over the past year. Falling home values have left many mortgage holders owing more than their home is worth, which hurts their chances of refinancing or selling their home to retire the debt.
On Tuesday, the National Association of Realtors said the median home price in March fell almost 8 percent from a year ago to $200,700.
The State Foreclosure Prevention Working Group is made up of representatives of 11 state Attorneys Generals, two state banking departments and the Conference of State Bank Supervisors. The report included 13 of the 20 largest mortgage servicers, representing 58 percent of all subprime mortgage loans serviced.