Freddie Mac has found that homeowners are becoming increasingly aware that
there may be help out there should they run into problems paying their
mortgage loans but there is still a long way to go in spreading the
The mortgage corporation has just released a survey done in cooperation with
Roper Public Affairs and Media, a leading international market research firm
that shows 57 percent of borrowers who are behind in their
payments are unaware that their lenders may be able to offer them workout options.
This, however, is an improvement from 2005 when the first such survey revealed
that 61 percent of delinquent borrowers didn't know that such help was available.
Roper contacted 2411 homeowners, 1,407 of whom said they had never been more
than one month late on a mortgage payment and 1,004 who were (currently we assume)
more than one month late.
According to Ingrid Beckles, vice president of servicing and asset management
for Freddie Mac, the study was motivated by the fact that
are unable to contact borrowers in more than half of the foreclosures we see
at Freddie Mac. That's why it is imperative to closely track borrower awareness
of workout options so the industry and the government can evaluate and enhance
their efforts to get more borrowers talking to their servicers about avoiding
The results, she said, "show[s] efforts to get borrowers to
call counselors are starting to work but that too many at-risk borrowers are
still unaware their servicers routinely provide alternatives that can help them
stay in their homes. This fact underscores the importance of convincing borrowers
to pick up the phone, call their servicer, and find out whether they can avoid
The survey found an increase in the percentages of delinquent borrowers who
recall their lenders reaching out to them (86 percent) and who in turn reached
out to their lender (75 percent) to discuss workout options and that the percentage
of delinquent borrowers aware there are housing counselors they can talk to
about their mortgage has increased from 36 percent in 2005 to 44 percent today.
A majority (59 percent) of delinquent borrowers said their contact with their
servicers was helpful although one in four said the experience was "intimidating"
While 57 percent of delinquent borrowers were unaware in the broadest sense
that options existed for them, the new survey found that borrowers were aware
of specific options when they were named by interviewers. When prompted 63 percent
of delinquent borrowers said they knew about repayment plans, 68 percent knew
of the possibility of converting an adjustable rate into a fixed rate mortgage,
and 78 percent knew that they could pay off their mortgage in a single lump
sum. In addition, 54 percent knew that delinquent amounts could be added to
the loan balance and 52 percent that the length of the mortgage term could be
extended to lower monthly payments. However, only 43 percent were aware of a
temporary suspension of payments (forbearance) and 41 percent knew of the possibility
of a deed-in-lieu of foreclosure.
One in four delinquent borrowers chose not to accept their lender's invitation
to discuss workout options, but the percentage that said they
believed there was no reason to call or nothing the servicer could do to help
fell from 48 percent in 2005 to just 33 percent in 2007. On the other hand,
the percentage that chose not to call because they said they didn't have enough
money to make a payment rose from 7 percent to 16 percent and the percentage
who denied they were having trouble making their payment doubled from six to
Among those delinquent borrowers who have contacted their mortgage lenders,
59 percent found those lenders to be helpful and 32 percent thought the experience
reassuring. However, 42 percent found the calls frustrating, 35 percent were
embarrassed and about one in four found it to be a scary, intimidating, confusing,
and/or pointless experience.
The survey found some differences between delinquent borrowers and those in
good standing. The former tended to be younger than the latter (62 percent under
the age of 50 compared to 40 percent) and more likely to live in homes with
an annual income under $75,000 (64 percent vs. 48 percent; in addition, 27 percent
of homeowners in good standing had incomes exceeding $100,000 compared to 11
percent of those who were delinquent.)
Delinquent borrowers worry often about having enough money, have many financial
obligations each month, do not feel in control of their finances, are not comfortable
talking to their financial institutions about their finances and tend to feel
that those institutions do not treat them fairly. Borrowers in good standing
have the opposite attitudes toward their finances and financial institutions.
Delinquent borrowers are also about four times as likely as homeowners in good
standing to pay key monthly bills late.
The survey was conducted after the HOPE hotline was established but before
the rate freeze was announced by President Bush in December.
Still, even before the recent flurry of media stories about 888-995-HOPE, word
was out there. According to the survey, nearly one in four delinquent borrowers
(23 percent) report seeing ads for the hotline and 9 percent who were aware
of it had actually made the call. The sponsor, Homeownership Preservation Foundation.,
says the toll-free number now receives between 1500 and 3000 calls per day,
up from 250 per day one year ago. More than 200,000 homeowners have called the
hotline since June 25 of last year.
The study concludes that mortgage servicers can do several
things to improve communication and possibly debt resolution with their borrowers:
- Since homeowners say they open correspondence from their financial institutions
(as opposed to screening or not returning calls), mailings should detail the
options available and encourage borrowers to pursue them.
- Encourage borrowers to fully understand those options and the range of resources
- Emphasize options that would allow homeowners to keep their homes and avoid
mortgage foreclosure scams;
- Use the internet as an education tool to promote responsible workout options
for delinquent borrowers. (The survey also found that troubled homeowners
were increasingly likely to look for helpful information on the web.)