The Mortgage Bankers Association (MBA) released information
Thursday on the role the mortgage industry is playing in the
current drive to help homeowners who are delinquent on or struggling with their
According to MBA's data, during the third quarter of 2007 the mortgage industry
worked with borrowers to modify approximately 54,000 loans
and established formal repayment plans with an additional 183,000 borrowers.
However, foreclosure actions were started on an estimated 384,000 loans.
The report stated, however, that 63 percent of the foreclosure actions
were in cases where the borrower did not live in the home, did not respond to
repeated attempts by the lender to reach them, or were defaulting on a previously
existing loan modification or repayment plan.
Subprime loans played a major role in the loan resolution efforts. Approximately
13,000 of the loan modifications were done on behalf of subprime adjustable
rate mortgage loans as were 90,000 of the repayment plans. Fixed-rate subprime
loans accounted for 15,000 of the modifications and 30,000 repayment plans.
Subprime ARMs also accounted for about 166,000 of the foreclosure
actions but 18 percent of these were on investor-owned homes. In 21 percent
of the actions the borrower failed to respond to contacts by the lender. 40
percent of the subprime borrowers who became subject to foreclosure already
had a repayment plan or loan modification in place but were not performing as
Across the board investor-owned homes represented a significant
part of the problem, at least in the third quarter. They accounted for 28 percent
of subprime fixed-rate foreclosure actions, 18 percent of prime ARM foreclosure
starts and 14 percent of new prime fixed-rate foreclosure actions.
Anyone who works in any type of financial recovery operation will tell you
that borrowers tend to panic when they get in trouble with payments. And panic
frequently leads to avoidance. Troubled debtors don't answer the phone
or screen calls, refuse to return calls from creditors, even hang up when contact
is made. That is borne out by the MBA figures. 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 subprime ARM foreclosure starts, 21
percent of subprime fixed-rate foreclosure starts, 17 percent of prime ARM foreclosure
starts and 33 percent of the prime fixed-rate foreclosures started.
Jay Brinkmann, MBA's Vice President of Research said, "The
mortgage industry took major steps during the third quarter to help those borrowers
who could be helped. 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
"It is likely that the number of loan modifications for subprime ARMs will
continue to grow through the outreach efforts of the industry," Brinkmann continued
"Particularly through the HopeNOW
Alliance that 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."
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.