A heavily promoted federal effort aimed at putting the brakes on the national foreclosure rate is barely keeping pace, according to a second report by a group of state banking and law officials.
About 70 percent of seriously delinquent borrowers - those at least two months behind on their mortgage payment - still are not on track to resolve their problem, the State Foreclosure Prevention Working Group said yesterday.
The group consists of 11 state attorneys general, including Roy Cooper, the attorney general for North Carolina, and state banking regulators in New York and North Carolina. The group's first report was released in February.
"Servicers have worked hard to reduce unnecessary foreclosures," said Mark Pearce, the deputy commissioner of banks for North Carolina. "But we are still treading water in dealing with the large number of borrowers who need assistance."
That's despite ramped-up national campaigns, such as the HopeNow hotline (888-995-HOPE), and initiatives by servicers to fast-track loan modifications.
Some financial and consumer-advocacy officials have said that resolving the foreclosure crisis will come down to two factors: Struggling homeowners confronting the reality of foreclosure and getting help, and mortgage lenders and servicers voluntarily throwing out more potential home preservers.
"We concur with the findings of the Commissioner of Banks Office," said Kathy Banks, the director of counseling for Consumer Credit Counseling Service of Forsyth County Inc.
"Our counselors have experienced a number of delays resulting from strain in the servicers' loss-mitigation departments, such as being told, once a solution has been verbally agreed upon, that it will take 14 days to assign it to a rep to process, or in another case, six to eight weeks before anyone could take a look at it," Banks said.
"Given the magnitude of the problem, and the current economic downturn - gas and food prices impacting the family budget more every day - one would think the lenders and servicers would throw out their old models of doing business and step up to meet the current need of their customers." she said.
The foreclosure crisis is projected to grow worse this year after filings reached a record last year, according to the Mortgage Bankers Association. Financial institutions already have recorded mortgage-related asset write-downs and credit losses valued at $290 billion.
"While North Carolina has fared better than most other states, we need to redouble our efforts to avoid preventable foreclosures," Pearce said.
According to a recent report by RealtyTrac Inc., North Carolina ranked 26th in the nation in rate of foreclosure. But a report presented by the N.C. Commissioner of Banks to the General Assembly on Jan. 23 provided little comfort on the state of the housing market.
It found that there could be an increase of up to 20 percent in foreclosures in North Carolina this year for three main reasons: more subprime loans posing payment shock as adjustable-rate mortgages reset at higher levels, slowing growth of home prices coupled with high leverage ratios, and a spillover from the slowing economy.
The Winston-Salem metropolitan statistical area is projected to take a $72 million hit related to foreclosures this year, according to a national forecast released in November at the U.S. Conference of Mayors in Detroit. The MSA consists of Davie, Forsyth, Stokes and Yadkin counties.
But the number of foreclosure filings in the Winston-Salem MSA decreased 9 percent in March to 188 compared with February, RealtyTrac said.
The bank supervisors started collecting data in October from 13 of the nation's top 20 mortgage-servicing companies who deal with loans to borrowers with weak or limited credit histories.
Two-thirds of homeowners who did get help from nonprofit counseling groups or mortgage-servicing companies got their interest rates lowered to levels they could afford or had the principal owed on the loan lowered.
But the report said that "the burgeoning numbers of delinquent loans that do not receive loss-mitigation attention are clogging up the system on their way to foreclosure."
"We fear this will translate to increased levels of vacant foreclosed homes that will further depress property values and increase burdens on government services," the group said.
Michael Walden, an economics professor at N.C. State University, said that reducing the foreclosure rate depends primarily on getting the housing and job markets back into balance.
"On the supply side, the lower rates of new construction are helping, as is the softening of prices," Walden said.
"On the demand side, lower interest rates are helpful, but the key is stabilization of the job market and improved income prospects for threatened households.
"Even though there have been some positive signs for the economy recently, the job market will likely continue to deteriorate through the summer,'' he said. "Thus, I expect foreclosures to be an issue for at least the rest of the year, although some moderation will occur toward year's end."
PREVENTING FORECLOSURES
Local lenders said that increased use of these options could help reduce the number of home-foreclosure filings in the Triad:
* Reducing fees to refinance or convert adjustable-rate mortgages into fixed-rate mortgages.
* Allowing borrowers to pay only the interest on a loan for a limited period to help them rebound financially or allow time to sell their home.
* Applying the delinquent amount to the end of the loan, giving homeowners time to catch up on their payments.
Source: Local financial institutions
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