Marylanders getting more mortgage help than many

But foreclosures affect 6,300 homes

January 18, 2008|By Jamie Smith Hopkins | Jamie Smith Hopkins,Sun reporter

Marylanders in trouble on their mortgages are getting more help from their lenders than homeowners in the country as a whole, a new report suggests.

Even so, the number of homes that companies began foreclosure proceedings on last summer outpaced the number of homeowners they struck deals with, according to the survey of mortgage servicers released by the Mortgage Bankers Association yesterday.

Servicers started foreclosure proceedings on nearly 6,300 Maryland homes from July through September, the group estimated. During that time, the companies agreed to repayment plans or loan modifications for almost 5,800 borrowers. That's about 9 percent more attempts to foreclose than new "workout" plans.

Nationwide, though, the number of new foreclosure proceedings was 60 percent higher than the number of borrowers helped - a difference of about 150,000 homes. That difference was fueled in part by several states hard-hit by the housing slump, such as California and Florida, where new foreclosures outnumbered workout plans more than two-to-one.

The Mortgage Bankers Association contended that servicers "took major steps" to help borrowers who could be helped. It said that six out of every 10 loans embroiled in foreclosure proceedings last summer - here and nationally - belonged either to investors, to homeowners who would not respond to lender overtures or to borrowers who fell behind despite getting an earlier workout plan.

The trade group said its survey included companies that collect payments for more than 60 percent of U.S. home loans.

"The industry is doing a good job, and I think we're going to see these numbers grow," said Jay Brinkmann, vice president of research and economics for the association.

Consumer advocates have been skeptical of the industry's efforts. Kathleen Day, a spokeswoman for the nonprofit Center for Responsible Lending, said the mortgage bankers group consistently "paints a much rosier picture than has proved to be the case."

The report's findings for Maryland don't match up with what housing counselors at St. Ambrose Housing Aid Center in Baltimore are seeing, said deputy director Lisa R. Evans. Last summer, the nonprofit group worked with about 400 people who were behind on their mortgage payments. About 100 have received some form of relief from their lenders, Evans said.

Many of St. Ambrose's clients seek counseling help after their lenders start foreclosure proceedings, she said, which could explain some of the difference. It's more difficult to hang on to the house at that point.

Evans wonders how much of the relief offered by mortgage servicers last summer would merely delay foreclosure rather than avert it. She's seen loan modification plans in which the servicer agrees not to raise interest rates for three months, "no long-term solution." She's seen repayment plans that tack on an extra $250 a month for the next four months, which she said is unrealistic for a borrower who was having trouble with the original amount.

The good news is that lenders seem somewhat more responsive now, she said. The bad news is that they're overwhelmed by calls for help.

"We are seeing some changes, but it's not dramatic yet," Evans said.

The mortgage industry came under fire from consumer groups, lawmakers and regulators last fall after a survey by Moody's Investors Service in August showed that lenders modified only 1 percent of subprime loans to people with poor credit records.

A follow-up survey by Moody's found in September that 3.5 percent of loans that reset to higher levels in the first eight months of 2007 had been modified.

Moody's said many loan-servicing companies were still beefing up staff levels to handle an influx of loans resetting at higher levels, but some remain reluctant to modify them.

The Mortgage Bankers Association disputed that study's methods yesterday. The trade group said that the Moody's research did not include other kinds of aid offered to borrowers, such as "short sale" transactions in which a borrower is permitted to sell a home for less than the outstanding mortgage balance.

Also, the trade group noted that many borrowers fall behind on payments because of a job loss or the death of a spouse, not because loans reset at higher levels.

jamie.smith.hopkins@baltsun.com

The Associated Press contributed to this article.

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