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Business down? Implement the 100 percent model

National Mortgage Professional
Mar 10, 2008

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
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