The nation’s foreclosure crisis is on the verge of deepening – with only four out of ten seriously delinquent borrowers involved in any assistance – and the government mortgage relief campaign is falling short, according to the latest report by the State Foreclosure Prevention Working Group released today.
The group, made up of 12 state attorneys general and three banking regulators, has collected data from 13 mortgage servicers for two years. This is its fourth public report, and the first in more than a year.
The total number of struggling homeowners not on track for any foreclosure prevention assistance continues to grow, the group reported, with only four out of ten desperate borrowers involved in loss mitigation efforts.
And delays are common for those that are getting help. The average time to complete a loan modification for some servicers is more than six months.
The group said the government’s Home Affordable Modification Program, HAMP, is only making a dent in the foreclosure crisis. The program provides incentives for servicers to place homeowners in mortgage reduction trials before consideration for permanent relief.
“It is clear that these efforts must be improved and servicers have not succeeded in “turning the corner” to reduce the high levels of foreclosures,” the report said. “The State Working Group is concerned that if homeowners fall out of the HAMP program in large numbers, the numbers of foreclosures closed will jump significantly.”
Much of the group’s criticism of HAMP has been echoed by mortgage industry experts, some testifying at a Congressional hearing late last year with similar complaints.
The working group said that despite the growing number of loans that are “underwater” – where the homeowner owes more than the property is worth – only 9 percent of loan modifications in October 2009 involved reducing the unpaid balance by more than 10 percent.
One in four homeowners with a mortgage owes more than their home is worth, the group reported.
Here are some of the group’s recommendations:
- Servicers should suspend foreclosure proceedings on any loan currently in the loss-mitigation process. This is especially critical in states where non-judicial foreclosures often move very quickly.
- Loss mitigation programs must be improved to prioritize principal reduction in areas of significant home price declines.
- Servicers need to pay particular attention to reforming payment-option adjustable rate mortgages, or ARM loans. More than 40 percent of current payment-option ARMs are seriously delinquent, “despite the fact that this product was given to prime borrowers.”
- The HAMP program must increase transparency and reduce paperwork in order to reach its potential.
Click here for the full report.