According to a report released by the Mortgage Bankers Association, the mortgage industry initiated more than 235,000 loan modifications and repayment plans during the third quarter of 2007.
“The mortgage industry took major steps during the third quarter to help those borrowers who could be helped,” said Jay Brinkmann, MBA’s Vice President of Research, in a statement.
“Work outs for fixed rate loans are also in the interests of lenders to keep borrowers in their homes,” said Doug Duncan, chief economist for the Mortgage Bankers Association.
The group noted that 40 percent of subprime ARM-holders defaulted despite receiving a loan modification or payment plan.
Perhaps homeownership was pushed just a bit too hard?
Of the foreclosures reported, 63 percent were tied to speculators, borrowers that didn’t respond to help, or those who failed to make mortgage payments even after loan terms were eased.
“The economic incentive is for them to walk away,” said Duncan “And walking away from an investment property will have less impact on your credit than getting foreclosed on in your primary residence.”
Investment properties accounted for 19 percent of subprime ARM foreclosure starts and 20 percent of subprime fixed-rate foreclosure starts in California, the state showing the fastest increase in filings.
In Florida the numbers were 21 percent and 27 percent, respectively.
The inaugural report included data from mortgage companies that service roughly 33 million loans, or 62 percent of all loans.