The U.S. Treasury Department earlier this month said efforts to modify troubled home mortgages, after a disastrous start, have improved. But a group of state attorneys general this week said it still has a long way to go.
In fact, there will be an acceleration of foreclosures unless improvements are made in foreclosure prevention efforts, warned the State Foreclosure Prevention Working Group in a report that cites disturbing trends.
The new report of the State Working Group notes that six out of ten seriously delinquent borrowers are not even involved in loss-mitigation efforts. Those borrowers who are involved in loss-mitigation and foreclosure prevention face a process that is seriously backlogged.
"We certainly have not turned the corner on the foreclosure problem, despite major and commendable federal and state efforts," said Iowa Attorney General Tom Miller, a leader of the State Foreclosure Prevention Working Group. "We've said it before, and we are saying it now: Servicers must do even more to slow the tide of unnecessary foreclosures."
Miller led a national news conference telephone call Wednesday announcing the Group's fourth "Analysis of Mortgage Servicing Performance." Miller was joined on the call by Richard Neiman, Superintendent of the NY State Banking Dept., and Mark Pearce, North Carolina Chief Deputy Commissioner of Banks.
The State Foreclosure Prevention Working Group, which consists of 12 state attorneys general, bank regulators for New York, North Carolina, and Maryland, and the Conference of State Bank Supervisors, was founded in 2007 and has issued three prior reports.
"From the beginning, our guiding principle has been that we should do everything possible to prevent unnecessary foreclosures," Miller said. "Not every foreclosure is avoidable, but finding an alternative solution usually is in the best interest of the homeowner, the mortgage holder, and also the neighborhood and local community," he said.
Disturbing trend
In a disturbing trend, the report notes that foreclosures are no longer heavily centered among subprime loans, but not affect a large number of prime loans as well. The total number of struggling homeowners not on track for any foreclosure prevention assistance continues to grow. The Home Affordable Modification Program (HAMP) has helped slow down the foreclosure crisis, but current efforts have been insufficient to get ahead of the foreclosure problem, the report found.
The Working Group report said the HAMP has led to offers of loan modification assistance to over 1.1 million homeowners, but the report says early indications are that servicers have been unable to implement the program effectively, and many homeowners with trial modifications are not yet qualified to transition to a permanent loan modification.
"To be sure, we would be in a much worse place without these efforts," the States said, but "these efforts must be improved."
