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Survey Reveals Mortgage Servicers Still Not Helping Troubled Borrowers Keep Their Homes

SAN FRANCISCO, July 2 /PRNewswire-USNewswire/ — Home loan servicers
and lenders are not working with borrowers who need loan modifications in
order to keep their homes. In a third survey of California mortgage
counseling agencies servicing homeowners statewide, the California
Reinvestment Coalition (CRC) found that despite lenders’ promises to help
borrowers, foreclosure is still the most common outcome for homeowners
struggling to make mortgage payments.

“With little accountability, obligation, or oversight, home loan
servicers are not doing enough to keep borrowers in their homes,” says
Kevin Stein, CRC associate director, who analyzed the survey results. “For
some borrowers, this may mean that they will be doubly victimized by
predatory lending practices on the front end, and now by unhelpful loan
servicing practices that lead to foreclosure on the back end. We must work
immediately and diligently towards solutions to avoid this result.”

CRC released the report “The Continuing Chasm Between Words and Deeds
III,” at a press conference today at the counseling agency Visionary Home
Builders in Stockton. The report analyzes a survey of 42 mortgage
counseling agencies that served 11,062 borrowers in April 2008. Survey
results show that borrowers are not getting enough help from loan servicers
and are pushed into foreclosure. Counselors also report that there is
little oversight of these loan servicers although the loans going into
foreclosure were made at a time when deceptive and abusive lending
practices were rampant in California, as evidenced by the recent lawsuit
from the Attorney General’s office against Countrywide Financial, the
state’s largest lender.

Since the release of CRC’s first mortgage counseling agency survey
results in October, there have been increasing media reports of
foreclosures, and increasing public pronouncements by politicians, industry
trade associations and lenders about what is being done to solve the
problem. While many of these efforts are well intentioned, the bottom line
is that, on the ground, servicers are not helping California borrowers
avoid foreclosure to any significant degree.

California mortgage counseling agencies that responded to the survey
confirm more could have been done to keep families in their homes. They
reported:

— Lenders are not responsive. Agencies were asked if servicers
consistently modify loans by fixing interest rates for the life of the loan
and all groups responded that the industry as a whole is not consistently
modifying loans for long-term affordability. No group reported that the
industry as a whole was modifying loans for the long term.

— Borrowers are experiencing devastating outcomes. Counseling agencies
were asked how common different loss mitigation outcomes were for their
borrowers. Despite a reported increase in servicer willingness to offer
loan modifications, the responses to this critical question were as bleak
as those a few months ago. A shocking 26 groups, or 68.4% of those
surveyed, said that foreclosures are a very common outcome for their
clients.

— Outreach to borrowers in trouble is generally poor. Despite lenders’
assertions about reaching out to borrowers BEFORE they face problems from
rising interest rates and higher monthly payments, most counseling and
legal service agencies do not see this happening. Only 30% of groups
surveyed reported that the industry as a whole was conducting outreach to
borrowers before rates reset.

— The vast majority of loans should not have been made. A shocking 90%
of respondents reported it was “very common” for their clients to have
received loans that were unaffordable to them at the time the loan was
made.

— Industry fraud and abuse of immigrants are substantial concerns.
Nearly 60% of responding groups reported that non-English speakers were
sold loans in their native language, but provided English-only documents.
This is a recipe for abuse, and flies in the face of California state law
requiring translation of certain documents in certain transactions.
Similarly, 55% of groups surveyed cited lender/broker abuse as a very
common problem.

— Principal write downs are not happening. Many borrowers now owe more
than their homes are worth, making it impossible for them to refinance into
a new loan. These borrowers need for their loan servicers to reduce or
write down the amount of money owed to be in line with the home’s value.
While 44.5% of counselors reported that this solution would have helped
their clients, none of the groups reported that loan servicers were
commonly offering principal reductions. Only two groups said it was a
somewhat common occurrence.

— Tenants are being impacted. Perhaps the most compelling victims of
all in the foreclosure crisis are tenants living in non-owner occupied
housing. Often tenants will pay their rent one day, only to find soon
thereafter that the property has been foreclosed upon, and they are being
forced to leave. A majority of surveyed agencies (57.9%) said that tenants
are a somewhat common presence in properties they are trying to save.

The California Reinvestment Coalition released the report at a press
conference today in Stockton, the city with the highest foreclosure rate in
the country. Housing counselors, borrowers, members of prominent labor
unions in that area and consumer advocates were all present to express
their concerns about the lack of responsiveness from lenders to keep
working families in their homes. Even some of the loan servicers who signed
an agreement with California’s governor to modify loans fared poorly in
CRC’s survey.

CRC and all the groups present at the press conference are calling on
lenders to work harder to help borrowers avoid foreclosure. They are also
demanding legislative reform to encourage loan modifications, and ensure
the bad lending practices that led to the state’s foreclosure crisis don’t
reoccur in the future. And they are asking Governor Schwarzenegger to hold
loan servicers accountable to their promises to help California homeowners
and communities.

For more information and a full copy of the report please visit
http://www.calreinvest.org or call Kevin Stein at (415) 430-8795.

The California Reinvestment Coalition advocates for the right of
low-income communities and communities of color to have fair and equal
access to banking and other financial services. CRC has a membership of
more than 250 nonprofit organizations and public agencies across the State.



See Also:

[Via Real Estate Newswire]

This entry was posted on Wednesday, July 2nd, 2008 at 1:52 pm and is filed under Foreclosure, Mortgage. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.

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