Rising Foreclosures Despite Aggressive Prevention Efforts
The Office of the Comptroller of the Currency and the Office of Thrift Supervision have issued a report showing that the number of homeowners falling into delinquency and foreclosure properties continues to increase despite aggressive efforts of mortgage lenders to prevent foreclosures.
The report, released by both agencies which regulate the mortgage industry, showed the challenges that the industry and the federal government are facing to abate the growing foreclosure properties.
It noted that foreclosure properties rates are projected to rise as the economy and the labor sector continue to weaken. Foreclosure properties are also expected to continue flooding the housing market as it will take months for President Barack Obama’s foreclosure prevention program to begin to show some impact.
According to Faith Schwartz, Hope Now Alliance executive director, financial institutions are committed on developing and finding affordable mortgage programs for distressed homeowners to prevent the spread of foreclosure properties.
Schwartz said that members of Hope Now Alliance have been reporting an increasing use of loan modifications this year.
The report pointed out that an increasing number of distressed homeowners are defaulting on their mortgages and are on the brink of turning their houses into foreclosure properties.
Furthermore, prime mortgage borrowers who are considered low risks have become part of the foreclosure crisis. The number of prime mortgage borrowers who missed more than two payments surpassed the number of subprime loan borrowers who are delinquent in the last quarter of 2008.
Meanwhile, the report found out that many distressed homeowners became delinquent after their loans have been modified. Loan modifications include reduce interest rates or expanding the loan terms.
In 2008, about 35 percent of borrowers who modified their loans missed three or more payments in nine months. Meanwhile, about 57 percent of borrowers missed one mortgage payment.
Neighborhood Assistance Corp. of America Chief Executive Officer Bruce Marks criticized lenders for blaming homeowners for defaulting on their mortgages and on their loan modifications. He claimed that in both cases, mortgage payments were unaffordable.
The report noted that a borrower is able to stay updated on his loan if his monthly payment is reduced. However, during the last quarter of 2008, about 58 percent of borrowers with modified loans did not have low monthly payments.
Also last year, nearly 1.44 percent of homeowners became delinquent first before they made one payment on their loans.
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