60% of Delinquent Mortgages Not in Loss Mitigation
According to a study from the State Foreclosure Prevention Working Group (SFPWG), 60% of borrowers with mortgages delinquent by 60 days or more are not being forwarded to the servicer's loss mitigation department. The SFPWG is a consortium of the Attorneys General of 12 states, three state bank regulators and the Conference of State Bank Supervisors. For the past two years, it collected delinquency and loss-mitigation data from the largest servicers of subprime mortgages in the country, totaling 4.6m loans as of March 2010. While some serious delinquent loans remain ignored, foreclosures are outpacing modifications. Since October 2007, the servicers completed 2.3m foreclosures. As HousingWire reported, HAMP cancelations number 616,839. Richard Neiman, superintendent of banks for New York State said such modifications are more likely to fail without principal reduction. “We expect banks to take the performance of these modifications into account when deciding the best options for both consumers and investors," Neiman said. "Without improvements to foreclosure preventions efforts, the group anticipates that hundreds of thousands of these seriously delinquent homeowners could end in foreclosure," according to the SFPWG statement. The group said improvements in more recent loan modifications are yielding some positive results, such as lower rates of redefaults. According to the data SFPWG collected from nine mortgage servicers, loans modified in 2009 are 40% to 50% less likely to be seriously delinquent six months after modification than loans modified during the same period in 2008. "As servicers have increased their use of payment reduction in making loan modifications, many more homeowners have succeeded in keeping their home," said Mark Pearce, North Carolina chief deputy commissioner of banks. Write to Jacob Gaffney.