Report: 7 of 10 Seriously Delinquent Borrowers Not Receiving Help

February 7, 2008 No Comments »

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A report released this morning by the Conference of State Bank Supervisors found that a rising number of loan delinquencies are outpacing loss mitigation efforts despite recent outreach efforts.

The group, led by Iowa Attorney General Tom Miller, said seven out of 10 seriously delinquent mortgage borrowers are not on track for any loss mitigation effort, blaming a lack of interaction between borrower and servicer.

Additionally, the CSBS said interest rate resets have not yet been the underlying cause of foreclosure, noting that a significant percentage of subprime ARM holders are delinquent before payment shock sets in.

On a positive note, the CSBS found that servicers have increased the use of loan modifications as opposed to simple repayment plans, with 45 percent working towards a long-term modification.

But noted that most delinquent loans resolved in October were done so on behalf of the homeowners themselves catching up on late mortgage payments.

“We have worked very hard with the servicers and the agencies to get the right information,” Miller said in a national teleconference this morning. “This was fairly painstaking. The bottom line of what we found is that … progress has been made. I think it’s also clear that a lot more effort has to be made.”

The group said the refinance option had also nearly evaporated, finding that borrowers who serially refinanced to avoid payment default were running out of options as home prices continue to fall.

Despite historically low mortgage rates, most homeowners in dire need of a refinance don’t have the required home equity to execute such a transaction.  Many even have negative equity

The report covers loan data from October 2007 from 13 of the largest subprime loan servicers, covering roughly 58 percent of the subprime mortgage market.

(Photo: debaird)

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