Survey: Most Delinquent Borrowers Unaware of Options

January 31, 2008 No Comments »

A survey released today by Freddie Mac and Roper Public Affairs and Media revealed that 57 percent of the nation’s delinquent borrowers don’t realize that their lenders may offer alternatives to help them avoid foreclosure.

Despite mortgage-related news dominating the airwaves and initiatives like Hope Now, only four percent more borrowers are aware of such workout options, compared to a survey conducted in 2005.

When prompted, 63 percent of delinquent borrowers said they knew about repayment plans, 68 percent knew about modifying an adjustable-rate mortgage into a fixed-rate loan, and 52 percent knew mortgage terms could be extended under some circumstances.

The Freddie Mac/Roper poll also indicated that delinquent borrowers aware of available housing counselors increased to 44 percent from 36 percent in 2005.

But is the heightened awareness leading to more positive action?

“One problem is that servicers are unable to contact borrowers in more than half of the foreclosures we see at Freddie Mac,” said Ingrid Beckles, Freddie Mac’s Vice President of Servicing and Asset Management, in a statement.

“That’s why it is imperative to closely track borrower awareness of workout options so the industry and the government can evaluate and enhance their efforts to get more borrowers talking to their servicers about avoiding foreclosure.”

Some Borrowers Still Not Connecting with Loan Servicers

Eighty-six percent of delinquent borrowers were aware of their mortgage lender‘s effort to contact them, up from 75 percent in 2005, while the percentage of borrowers who actually contacted their lenders increased from 68 to 75 percent during the same period.

The survey said 59 percent of delinquent borrowers said their contact with their servicers was helpful, but 25 percent called the experience “intimidating” or “confusing”.

One in four delinquent borrowers chose not to accept their lender’s invitation to discuss workout options like loan modifications, and the percentage that said they believed there was no reason to call or felt there was nothing the servicer could do to help fell from 48 percent in 2005 to just 33 percent in 2007.

However, the percentage that chose not to call because they said they didn’t have enough money to make a mortgage payment rose from 7 percent to 16 percent and the number who denied they were having trouble making their payment doubled from six to 12 percent.

When asked to suggest how servicers could improve communication, delinquent borrower’s answers included eliminating automated phone systems, providing more specific information and speaking with a live person.

Interestingly, 25 percent of delinquent borrowers chose the Internet as their first choice for mortgage information, nearly twice the number in 2005.

The 2007 Freddie Mac/Roper survey results are based on responses from 2411 adult homeowners, including 1,004 delinquent borrowers more than one month behind, conducted by telephone from October 23 through November 14.

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