Servicers Not Doing Enough for Troubled Borrowers, Consumer Group Says

As the number of foreclosures continue to outpace loan workout activity, consumer groups are growing restless — suggesting that servicers aren’t doing enough to help.

The latest to make the case on Wednesday afternoon was the California Reinvestment Coalition, which released a report that argued home loan servicers and lenders are not working with borrowers who need loan modifications in order to keep their homes.

“With little accountability, obligation, or oversight, home loan servicers are not doing enough to keep borrowers in their homes,” says Kevin Stein, CRC associate director, who analyzed the survey results.

“For some borrowers, this may mean that they will be doubly victimized by predatory lending practices on the front end, and now by unhelpful loan servicing practices that lead to foreclosure on the back end. We must work immediately and diligently towards solutions to avoid this result.”

The study surveyed housing counseling agencies, and found that only 30 percent of groups surveyed reported that the industry as a whole was conducting outreach to borrowers before rates reset. Ninety percent of respondents said it was “very common” for their clients to have received unaffordable loans, while 55 percent cited lender/broker abuse as a “very common problem.” The study also said that principal write-downs are “not happening,” based on input from the counseling agencies.

The perceptions of counseling agencies, of course, don’t necessarily prove that servicers aren’t “doing enough” — despite how the study is being sold by the CRC’s agenda-setting machine — but instead underscore the dramatic shift in public perception that is now underway regarding lending practices. It’s a shift that HW covered in a recent op-ed, where consumer groups that in many cases helped enable the sort of lending on the front end that put us into this mess are now looking to force servicers to keep the bad loans intact on the back end.

“It’s a complex mess of blame and politics that’s now being played,” one of HW’s sources suggested Thursday morning. “We went from looking at affordability criteria as limiting lending activity, and now we’re back to affordability in the way of focusing on servicing loans that were made with little regard for that sort of criteria to begin with.”

It’s a game being played on both sides of the industry fence right now, and given the stakes, neither industry groups nor consumer groups appear willing to give an inch: consumer groups use whatever data they can find to suggest that the industry is failing miserably, and industry groups use whatever data they can find to suggest that help is at record levels.

A recent press volley from the HOPE NOW consortium of lenders and servicers, for example, twisted loan workout data in its favor while ignoring the less-favorable aspects the data suggested; such an approach is really no different than the tactics being displayed by the consumer groups in their own full-court press for the hearts and minds of an increasingly jittery public.

At a press conference Wednesday in Stockton, Calif. — home to the nation’s highest foreclosure rate — the CRC and other consumer groups kept their drumbeat going, and said they were “demanding legislative reform to encourage loan modifications, and ensure the bad lending practices that led to the state’s foreclosure crisis don’t reoccur in the future.”

For more information, visit http://www.calreinvest.org.