Freddie Mac and Roper Public Affairs recently provided the results of the nation's first survey to learn why more late-paying borrowers risk losing their homes rather than reaching out to their mortgage servicers.
The survey found that 75% of delinquent borrowers recalled being contacted by their servicers. But a substantial percentage gave a variety of reasons for neglecting to follow up with their servicers to discuss workout options.
Specifically, 28% said there was no reason to talk to their servicers or that their servicers could not help them, 17% said they could take care of their payment problems without any help, and 7% said they didn't call because they didn't have enough money to make the payment. Other reasons for not calling included embarrassment (6%), fear (5%) or not knowing whom to call (5%).
The lack of borrower follow-up may help explain why more than six in 10 (61%) of late-paying borrowers said they were unaware of a variety of workout options that could help them overcome short-term financial difficulties. At the same time, 92% said they would have talked to their servicers had they known these options were available to them.
The Freddie Mac/Roper survey found no significant statistical difference in the responses given by white, black, Latino, male or female borrowers, which indicates an almost universal need for more borrower education about workout options and foreclosure avoidance.
‘The results of the Freddie Mac/Roper survey are a wake-up call to delinquent borrowers everywhere,’ says Ingrid Beckles, Freddie Mac's vice president of default asset management. ‘Its message is clear: When you get a phone call or letter from your servicer, don't ignore it – act on it. Pick up the phone, call your servicer and talk to them about the possibility of forbearance or some other repayment alternative, because it just may be your best chance to avoid foreclosure.’
‘Part of the problem is that the data shows that there's a knowledge gap: People's interest in the options available to them is quite high, but their awareness of these options is quite low,’ adds Elizabeth Armet, vice president and senior account executive at Roper Public Affairs.
While the likelihood of successful foreclosure avoidance depends upon each individual borrower's financial situation, a 2004 Freddie Mac study concluded that repayment plans could lower the probability of home loss by 80% among all borrowers and by 68% among low-to-moderate income borrowers. Working together, Freddie Mac and its servicers have helped more than 100,000 troubled borrowers avoid foreclosure and stay in their homes over the past two years.
‘These findings are consistent with what Wells Fargo Home Mortgage has done, and the great success we have had during the past several years with our early intervention process,’ says Patrick Carey, senior vice president, Wells Fargo Home Mortgage default and retention operations. ‘We try to educate customers to contact us early in times of financial crisis, and hope that they will learn from studies like these that their lenders can be their best resource when financial strain threatens their homes.’
‘The Freddie Mac/Roper survey underscores why we work so hard to encourage borrowers experiencing financial difficulty to proactively contact their lenders and explore the options that could help them avoid foreclosure,’ adds Deb Oakley, senior vice president at National City Mortgage. ‘At National City Mortgage, we also work with credit counseling agencies to further help borrowers learn how to take charge of their situation.’
Other notable findings from the Freddie Mac/Roper survey:
â�¢ Eighty percent of delinquent borrower households included at least one employed individual, and only 5% said someone in their household was unemployed. Seven percent of the respondents said they were retired.
â�¢ Among homeowners in good standing, 62% were employed, 32% were retired and only 2% were unemployed.
â�¢ Delinquent borrowers earned slightly less than borrowers in good standing. The median annual income among delinquent borrowers was $52,400, compared to $56,700 a year for homeowners in good standing.
â�¢ Forty-seven percent of borrowers in default were first-time homeowners, but 62% of the homeowners in good standing had owned a home in the past.