Foreclosure filings too high for mortgage servicers to handle

Voluntary industry efforts to address the mortgage Foreclosure crisis are not keeping up with the rising number of homeowners in trouble. Lenders and loan servicers have increased their loss Mitigation efforts in recent months, turning more to loan modifications than putting homeowners on repayment plans that do not address long-term issues.

Even with increased efforts, a report by the State Foreclosure Prevention Working Group in New York, who services multiple states, said the efforts are “falling far short of the need” to Prevent “millions of unnecessary foreclosures“. While more borrowers are getting loss-Mitigation help, rising level of new loans going bad overshadows those efforts.

“The collective efforts of servicers and government officials to date have not translated into meaningful improvement in Foreclosure prevention outcomes,” the report said.

“I am disappointed that the findings in this report show little progress has been made in addressing a crisis that is having devastating consequences for families and communities across New York State,” said Richard H. Neiman, state banking superintendent.

State officials said loan servicers are unable to manage the workload properly, since they are overwhelmed by the problem.

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“The servicing system was never designed to manage and re-underwrite millions of loans,” Mark Pearce, deputy commissioner of banks in North Carolina, said on a conference call with reporters. “As a result, at every step along the process, they’re running into problems.”

Thirteen of the 20 largest subprime mortgage servicers in the USA, representing 57 percent of the subprime loans serviced, participated in the report by providing data to the states. The others refused to cooperate.

Robert Shiller, Yale University economist and pioneer of Standard & Poor’s/Case-Shiller home price index, said Tuesday that there is a good chance housing prices will fall further than the 30 percent drop in the historic depression of the 1930s. Home prices nationwide already have dropped 15 percent since their peak in 2006.

Mr. Shiller endorsed a proposed legislation that would allow the Federal Housing Administration to back as much as $300 billion in mortgages for struggling homeowners. Servicers would have to agree to take a loss on the existing loans, while borrowers would have to show they could afford to make new payments on their refinanced mortgages.

Jim Hutchinson
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Reference Source: Buffalo News