HOPE NOW on Pace For Record; So, Too, Are Foreclosures

HOPE NOW, the well-known private sector alliance of mortgage servicers, counselors, and investors that is working to help prevent foreclosures, said Wednesday that mortgage servicers helped approximately 170,000 homeowners avoid foreclosure during May, via a combination of repayment plans and loan modification activity. If June holds the same pace, the mortgage lending industry will have helped approximately 519,000 homeowners in the second quarter of 2008 avoid foreclosure, HOPE NOW said, the largest number of workouts in any quarter since the alliance first began to compile data in July 2007. “The May report demonstrates that HOPE NOW is helping homeowners avoid foreclosure,” said executive director Faith Schwartz. “As promised, the industry has accelerated the pace at which it is helping homeowners.” Schwartz and most mortgage servicers are in an admittedly tough position — convince an increasingly angry public that private market servicers are doing all they can to help troubled borrowers avoid foreclosure. And by most industry accounts, servicers are doing all they can; the problem is that the number of troubled borrowers continues to grow at a rate that is quickly outpacing available help. A review of the HOPE NOW data by Housing Wire finds that while the total number of borrowers helped by alliance members is likely to increase to record levels during Q2, so too are the number of foreclosures — enough to actually establish a record low in the percentage of borrowers helped, relative to foreclosure activity. HW looked at the percentage of workouts relative to foreclosure activity in each reported period, and the numbers are telling: in 2007’s third quarter, ta ratio comparing the two stood at 2.95, meaning that for roughly every 3 borrowers helped, one lost their home. By Q4, that ratio had risen to 3.13 — good news. But in the first quarter of this year, the workout-to-foreclosure ratio fell to 2.44, despite an increase in workout activity, suggesting servicers were having trouble keeping up with foreclosures. In April, that ratio slipped even further to 2.26. Adding in May’s totals, that ratio is now a record low already, at 2.12 percent. The bottom line is that foreclosures are increasing quickly; whether this is because servicers are failing to keep pace, or — much more likely, in our eyes — because the number of borrowers that simply can’t afford their home is growing, will likely be the subject of heated debate among industry participants and consumer groups alike. (HOPE NOW doesn’t report on recidivism, or the number of failed repayment plans, but I’d also expect that the industry’s heavy reliance on repayment plans early on in the current credit cycle is at least partly responsible for some of the foreclosures now ending up on the books.) The great data dust-up The Office of the Comptroller of the Currency took aim at HOPE NOW’s workout claims in mid-June when it released its own data on mortgage servicing for the banks it regulates, taking the industry to task for what Comptroller of the Currency called a “lack of loan-level validation.” HOPE NOW’s Schwartz said on Wednesday that the difference was because HOPE NOW’s sampling universe was substantially larger, including 38 million loans, “substantially more” than the number included in either the OCC or an upcoming OTS report on loan servicing activity. “HOPE NOW is confident that the information it is receiving from its members and the methods being used to compile its monthly reports are reliable,” she said. “More important, our reports are an accurate picture of activity taking place in the broader marketplace to provide alternatives to foreclosure.” For more information, visit http://www.hopenow.com.