Loan servicers participating in the voluntary HOPE NOW coalition say they initiated repayment plans or modified the loan terms of two of every three delinquent subprime borrowers in the second half of 2007 — almost twice the rate of success previously reported.
The new findings were based on revised data that included more complete participation of members of the HOPE NOW alliance, according to a press release announcing the release of the survey.
The survey of loan servicers responsible for collecting payments on 33.3 million loans also found that foreclosure starts outnumbered foreclosure sales about 3 to 1, suggesting most borrowers who are foreclosed on are able to avoid losing their homes, at least temporarily.
Members of the HOPE NOW alliance have adopted standardized procedures intended to streamline the process of engaging in loan modifications, including freezing the interest rates of adjustable-rate mortgages, in an attempt to prevent foreclosures (see Inman News story).
The latest survey gauging the results of the HOPE NOW initiative included data from 14 loan servicers that, as of last September, were handling payments for about 62 percent of the 53.4 million outstanding U.S. residential mortgages.
The survey estimated that foreclosure starts increased 31 percent among prime loans and 56 percent for subprime loans between the first and fourth quarters of 2007. Extrapolating trends reported by HOPE NOW members to the industry as a whole, there were an estimated 1.5 million foreclosure starts in 2007, including 890,000 on properties purchased with subprime loans.
The survey found that there was only about one foreclosure sale for every foreclosure start, a rate that remained steady throughout the year and held true whether a loan was prime or subprime.
Extrapolating reports from participating HOPE NOW lenders to the industry as a whole, there were about 509,000 completed foreclosure sales in 2007, including 305,000 on homes purchased with subprime loans.
In some cases, a foreclosure sale may have been prevented because a borrower refinanced their loan or worked out a repayment plan or loan modification with their servicer. In other cases, foreclosure may have been forestalled because a borrower filed for bankruptcy.
The survey found HOPE NOW members increased the number of repayment plans initiated by 27 percent between the first and the fourth quarters of 2007, and boosted loan modifications by 166 percent during the same period. The number of loan modifications for subprime mortgages increased 259 percent.
Extrapolating the results of the survey to the industry as a whole, loan servicers made an estimated 336,000 loan modifications in 2007 — including 214,000 on subprime loans — and initiated 1.18 million formal repayment plans.
The majority of that activity took place during the second half of the year, including an estimated 652,000 repayment plans initiated and 217,000 loan modifications. During that period, an estimated 1.4 million borrowers were 60 days or more past due on their loans, and about 60 percent of delinquent borrowers could be expected to receive assistance in the form of a repayment plan (45.3 percent) or loan modification (14.8 percent).
With 288,000 foreclosure sales during the second half of 2007, there was roughly one foreclosure sale for every five delinquent borrowers.
Although HOPE NOW members service an estimated 94 percent of the nation’s 7.1 million subprime loans, the survey included only a subset of that group. The 10 HOPE NOW subprime loan servicers participating in the survey were responsible for collecting payments on 4.3 million subprime loans, or about 61 percent of the estimated total.
The survey also included results from 10 companies servicing 29 million prime loans, or about 63 percent of the estimated 46.4 million outstanding prime loans.
According to the survey, the percentage of all loans delinquent by 60 days or more rose from 2.1 percent during the first quarter to 2.9 percent in the fourth quarter.
The increase in delinquencies in prime loans, which stood at 1.1 percent during the first quarter, was most pronounced in the fourth quarter, when it increased by 23 basis points to 1.5 percent. Delinquencies in subprime loans grew from 8.23 percent in the first quarter to 12.37 percent in the fourth quarter.