Banks Offering Help To Foreclosed Victims
June 12th, 2008
The jumbo banks of the country that serve 23 million mortgages (amount adding up to $3.8 trillion) are now offering short-term help schemes rather than permanent ones to help foreclosed victims. Instead of loan modifications the focus was on payment plans reported John Dugan of U.S. Office, Comptroller of Currency. However from October 2007 to March 2008 loan modification numbers had increased. Banks have come in for sharp criticism for the slow response to modification plans despite highly publicized government plans to help the people stay in houses that are their homes.
A survey shows that more borrowers are defaulting leading to foreclosure risks. The delinquencies (payments falling behind 90 days) have spiked to 226,500 in March from 188,356 in October 2007. The number of loans ready to be foreclosed upon sharply increased from 1.23% of the loans from 0.9%. The contradiction is that the overall mortgage servicing portfolio of nine big banks show credit position “relatively satisfactory and relatively stable”.
In February 9 regulated banks were asked to give details of its performances on house loans on a monthly break up, starting from October. This step was taken after strong criticism that banks were standing in the way of foreclosure surveys. Now with these directives it is expected that if there were any lapses the matter would be quickly resolved and rectified.
The nine banks under the study of OCC are Bank of America, Citibank, First Horizon, HSBC, JP Morgan Chase, National City, USBank, Wachovia and Wells Fargo. The survey shows that fewer numbers of sub-prime loans in serious delinquency stages are being foreclosed upon. More prime loans (Alt-A) are in trouble. During the time period stretching from October 2007 to March 2008 the foreclosures emanating from prime Alt-A loans increased from 23,105 in October to 24,054. On the other hand sub-prime cases fell from 15,998 to 12,084. Foreclosures starting from all groups reached a high peak in January 2008. The study also shows that 94% of the mortgages were current and doing well from October to March.
Dugan argues that one reason for this is the national focus on alternatives and assistance operations targeting the sub-prime borrowers. This has enabled a high percentage of them to fend off foreclosure houses.
Short to medium term solutions are allowing the borrowers to become current on their payments. This plan is coming in for criticism because it is not helping the borrowers in the long run, whereas a loan modification does do so.
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