More than 235,000 loan modifications and repayment plans in third quarterMortgagePress.comMortgage Bankers Association, foreclosure, sub-prime ARMs
The mortgage industry modified an estimated 54,000 loans and
established formal repayment plans with another 183,000 borrowers
during the third quarter of 2007, according to a report issued by
the Mortgage Bankers
Association. By comparison, foreclosure actions were started on
approximately 384,000 loans. Of those foreclosures, 63 percent were
cases where the borrower did not live in the home, the borrower did
not respond to repeated attempts by the lender to contact them, or
the borrower failed to perform on a repayment plan or loan
modification that was already in place.
"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. "The numbers of loan
modifications, negotiated repayment plans established and other
actions to help borrowers are large and compare favorably with the
number of foreclosure actions started—particularly when those
foreclosures are adjusted to remove the borrowers who clearly could
not be helped."
"It is likely that the number of loan modifications for
sub-prime ARMs will continue to grow through the outreach efforts
of the industry, particularly through the HopeNow Alliance," Brinkman
continued. "[The HopeNow Alliance] includes counselors, mortgage
market participants and mortgage servicers working together to try
and help avoid foreclosures whenever possible. The U.S. Treasury Department has
played a crucial role in bringing the lending community together to
develop approaches to deal with the current problems."
For sub-prime ARM loans, there were approximately 13,000 loan
modifications and 90,000 repayment plans established in the third
quarter. For borrowers with sub-prime fixed-rated loans, loan
servicers instituted 15,000 loan modifications and 30,000 repayment
plans.
The report found that while approximately 166,000 foreclosure
actions were started on sub-prime ARM loans during the third
quarter, approximately 18 percent of those were on investor-owned
properties. In 21 percent of the cases, the borrower either could
not be located or would not respond to repeated attempts by the
lenders to contact them. Sub-prime ARM borrowers who already had a
repayment plan or loan modification in place, but were unable to
avoid default anyway, accounted for 40 percent of the sub-prime ARM
foreclosures.
The MBA report is based on responses from mortgage servicers
covering about 33 million mortgage loans, or approximately 62
percent of the loans outstanding. The numbers are grossed up to
reflect the partial coverage of the market.
While investor-owned properties accounted for 18 percent of
foreclosure starts for sub-prime ARM loans in the third quarter,
they accounted for 28 percent of sub-prime fixed-rate foreclosure
starts, 18 percent of prime ARM foreclosure starts and 14 percent
of prime fixed-rate foreclosure starts. In California, the state
showing the fastest increase in foreclosures started,
investor-owned properties accounted for 19 percent of sub-prime ARM
foreclosure starts and 20 percent of sub-prime fixed-rate
foreclosure starts. In Florida, the other state seeing a rapid
increase in foreclosures, investors accounted for 21 percent of
sub-prime ARM foreclosures and 27 percent of sub-prime fixed-rate
foreclosures.
Cases where the borrower could not be located or would not
respond to attempts by the mortgage servicer to contact them
accounted for 21 percent of sub-prime ARM foreclosure starts, 21
percent of sub-prime fixed-rate foreclosure starts, 17 percent of
prime ARM foreclosure starts and 33 percent of prime fixed-rate
foreclosures started.
For more information, visit www.mortgagebankers.org.
