According to a recent report from the Mortgage Bankers Association (MBA), servicers modified an estimated 54,000 loans and established formal repayment plans with another 183,000 borrowers during the third quarter of 2007.
The MBA says foreclosure actions were started on approximately 384,000 loans, but 63% of those foreclosures were cases where the borrower did not live in the home, did not respond to repeated attempts by the servicer to make contact or failed to perform on an existing repayment plan or loan modification.
‘The mortgage industry took major steps during the third quarter to help those borrowers who could be helped,’ comments Jay Brinkmann, the MBA's vice president of research. ‘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 be helped.’
Brinkmann adds that the number of loan modifications for subprime adjustable-rate mortgages (ARMs) will most likely continue to grow, through the outreach efforts of the industry. For instance, the HOPE NOW alliance – which includes counselors, mortgage market participants and mortgage servicers – has been beneficial, along with efforts from the U.S. Treasury Department.
For subprime ARMs, there were approximately 13,000 loan modifications and 90,000 repayment plans established in the third quarter, the MBA says. For borrowers with subprime fixed-rated loans, servicers instituted 15,000 loan modifications and 30,000 repayment plans.
While approximately 166,000 foreclosure actions were started on subprime ARMs during the third quarter, approximately 18% of those were on investor-owned properties, the report says. And in 21% of the cases, the borrower either could not be located or would not respond to repeated attempts by servicers to contact them.
Moreover, subprime ARM borrowers who already had a repayment plan or loan modification in place but were unable to avoid default accounted for 40 % of the subprime ARM foreclosures, the MBA adds.
While investor-owned properties accounted for 18% of foreclosure starts for subprime ARMs in the third quarter, they accounted for 28% of subprime fixed-rate foreclosure starts, 18% of prime ARM foreclosure starts and 14% of prime fixed-rate foreclosure starts.
In California – the state exhibiting the fastest increase in foreclosures started – investor-owned properties accounted for 19% of subprime ARM foreclosure starts and 20% of subprime fixed-rate foreclosure starts. In Florida – another state seeing a rapid increase in foreclosures – investors accounted for 21% of subprime ARM foreclosures and 27% of subprime fixed-rate foreclosures.
Also, cases where the borrower could not be located or would not respond to contact attempts accounted 21% of subprime fixed-rate foreclosure starts, 17% of prime ARM foreclosure starts and 33% of prime fixed-rate foreclosure starts.
