Five Brothers


Seven out of ten seriously delinquent borrowers in the United States have yet to enter into a suitable loss mitigation strategy, according to a new report from the State Foreclosure Prevention Working Group. 

The State Foreclosure Prevention Working Group, which is made up of various attorney general offices and banking regulators, said in its most recent report that all subprime servicing data collected for its January 2008 report (which measures activity from October to January) is "nearly unchanged from October 2007."

"In normal times, one would not expect a significant change in a four-month period; however, this time period involved a dramatic increase in public attention to the subprime mortgage crisis, a ramping up of efforts by the HOPE NOW Alliance, and the initiation of new creative outreach efforts by servicers and government officials," the State Foreclosure Prevention Working Group concluded in its report.  The group added, "Based on our analysis, the collective efforts of servicers and government officials to date have no translated into meaningful improvement in foreclosure prevention."

The report says the apparent "lack of significant improvement" has nothing to do with the servicers' failure to act, but rather with a systematic failure within servicing platforms to effectively handle an influx of troubled loans.

"Almost two-thirds of all loss mitigation efforts started are not completed in the following months," the State Foreclosure Prevention Working Group asserted in its report.  "Most loss mitigation efforts do not close quickly.  This consistent trend over the lat three months suggests that many proposed loss mitigations fail to close, rather than simply taking longer than a month to work through the system."

The State Foreclosure Working Group proposes in its report the servicers, investors and government officials work to create a "more systematic loan work-out system," while also slowing down the foreclosure process in an effort to "allow for more loan work-outs."

Author:  Kerri Panchuk
Date:  04.22.08