SAN FRANCISCO, July 2 CA-CRC-Mortgage-Study
SAN FRANCISCO, July 2 /PRNewswire-USNewswire/ -- Home loan servicers and lenders are not working with borrowers who need loan modifications in order to keep their homes. In a third survey of California mortgage counseling agencies servicing homeowners statewide, the California Reinvestment Coalition (CRC) found that despite lenders' promises to help borrowers, foreclosure is still the most common outcome for homeowners struggling to make mortgage payments.
"With little accountability, obligation, or oversight, home loan servicers are not doing enough to keep borrowers in their homes," says Kevin Stein, CRC associate director, who analyzed the survey results. "For some borrowers, this may mean that they will be doubly victimized by predatory lending practices on the front end, and now by unhelpful loan servicing practices that lead to foreclosure on the back end. We must work immediately and diligently towards solutions to avoid this result."
CRC released the report "The Continuing Chasm Between Words and Deeds III," at a press conference today at the counseling agency Visionary Home Builders in Stockton. The report analyzes a survey of 42 mortgage counseling agencies that served 11,062 borrowers in April 2008. Survey results show that borrowers are not getting enough help from loan servicers and are pushed into foreclosure. Counselors also report that there is little oversight of these loan servicers although the loans going into foreclosure were made at a time when deceptive and abusive lending practices were rampant in California, as evidenced by the recent lawsuit from the Attorney General's office against Countrywide Financial, the state's largest lender.
Since the release of CRC's first mortgage counseling agency survey results in October, there have been increasing media reports of foreclosures, and increasing public pronouncements by politicians, industry trade associations and lenders about what is being done to solve the problem. While many of these efforts are well intentioned, the bottom line is that, on the ground, servicers are not helping California borrowers avoid foreclosure to any significant degree.
California mortgage counseling agencies that responded to the survey confirm more could have been done to keep families in their homes. They reported:
-- Lenders are not responsive. Agencies were asked if servicers consistently modify loans by fixing interest rates for the life of the loan and all groups responded that the industry as a whole is not consistently modifying loans for long-term affordability. No group reported that the industry as a whole was modifying loans for the long term.
-- Borrowers are experiencing devastating outcomes. Counseling agencies were asked how common different loss mitigation outcomes were for their borrowers. Despite a reported increase in servicer willingness to offer loan modifications, the responses to this critical question were as bleak as those a few months ago. A shocking 26 groups, or 68.4% of those surveyed, said that foreclosures are a very common outcome for their clients.
-- Outreach to borrowers in trouble is generally poor. Despite lenders' assertions about reaching out to borrowers BEFORE they face problems from rising interest rates and higher monthly payments, most counseling and legal service agencies do not see this happening. Only 30% of groups surveyed reported that the industry as a whole was conducting outreach to borrowers before rates reset.
-- The vast majority of loans should not have been made. A shocking 90% of respondents reported it was "very common" for their clients to have received loans that were unaffordable to them at the time the loan was made.
-- Industry fraud and abuse of immigrants are substantial concerns. Nearly 60% of responding groups reported that non-English speakers were sold loans in their native language, but provided English-only documents. This is a recipe for abuse, and flies in the face of California state law requiring translation of certain documents in certain transactions. Similarly, 55% of groups surveyed cited lender/broker abuse as a very common problem.
-- Principal write downs are not happening. Many borrowers now owe more than their homes are worth, making it impossible for them to refinance into a new loan. These borrowers need for their loan servicers to reduce or write down the amount of money owed to be in line with the home's value. While 44.5% of counselors reported that this solution would have helped their clients, none of the groups reported that loan servicers were commonly offering principal reductions. Only two groups said it was a somewhat common occurrence.
-- Tenants are being impacted. Perhaps the most compelling victims of all in the foreclosure crisis are tenants living in non-owner occupied housing. Often tenants will pay their rent one day, only to find soon thereafter that the property has been foreclosed upon, and they are being forced to leave. A majority of surveyed agencies (57.9%) said that tenants are a somewhat common presence in properties they are trying to save.
The California Reinvestment Coalition released the report at a press conference today in Stockton, the city with the highest foreclosure rate in the country. Housing counselors, borrowers, members of prominent labor unions in that area and consumer advocates were all present to express their concerns about the lack of responsiveness from lenders to keep working families in their homes. Even some of the loan servicers who signed an agreement with California's governor to modify loans fared poorly in CRC's survey.
CRC and all the groups present at the press conference are calling on lenders to work harder to help borrowers avoid foreclosure. They are also demanding legislative reform to encourage loan modifications, and ensure the bad lending practices that led to the state's foreclosure crisis don't reoccur in the future. And they are asking Governor Schwarzenegger to hold loan servicers accountable to their promises to help California homeowners and communities.
For more information and a full copy of the report please visit www.calreinvest.org or call Kevin Stein at (415) 430-8795.
The California Reinvestment Coalition advocates for the right of low-income communities and communities of color to have fair and equal access to banking and other financial services. CRC has a membership of more than 250 nonprofit organizations and public agencies across the State.
SOURCE California Reinvestment Coalition
