SAN FRANCISCO, Oct. 10 /PRNewswire-USNewswire/ — California’s largest lenders are not helping borrowers, who struggle to make their mortgage payments, avoid foreclosure. The California Reinvestment Coalition (CRC) surveyed 33 of the state’s more than 80 mortgage counseling agencies that offer assistance to financially strained borrowers, and found that most borrowers are pushed to foreclosure or short sale, leaving them without the homes they worked so hard to own.
Fifty-seven percent of counselors surveyed reported foreclosure, and 33 percent reported short sale, as the most common outcomes for borrowers who cannot afford to pay their mortgages. Both of these outcomes lead to more people losing their homes.
“The survey findings are distressing,” says CRC Associate Director Kevin Stein. “Until lenders begin to deal honestly with this crisis and act in earnest, thousands upon thousands of Californians will suffer from foreclosure and the forced sale of their homes. The consequences will be devastating for homeowners, their neighborhoods, local governments and the state's economy.”
The results of CRC’s survey, released today on www.calreinvest.org, reveal that lenders are not working with borrowers and their counselors to decrease the number of foreclosures in the state. California cities report some of the highest foreclosure rates in the country. The state lost almost 60,000 homeowners in August alone. This, experts say, is just the beginning. Countless Californians face rising interest rate resets that threaten to put another 500,000 homeowners at risk of foreclosure over the next two years, Stein says.
Mortgage counselors are often the only supportive professionals to whom these homeowners can turn with their mortgage problems. Counselors are intermediaries between borrowers and their lenders. The counselors who responded to CRC’S survey assisted nearly 10,000 consumers in the month of August. A majority of these counselors reported that lenders are not doing enough to help their clients.
“We have seen hundreds of clients whose only hope of keeping their homes is to work with their lenders, but most lenders are difficult to reach, and in many cases cannot seem to modify loans,” says Lori Gay, executive director of Los Angeles Neighborhood Housing Services. “It is important for lenders to work with borrowers and non-profit housing counseling agencies to modify loans and preserve homeownership in California.”
Lenders routinely say they will negotiate better loan terms with borrowers who cannot afford their interest rate resets. Such loan modifications include fixing a borrower’s adjustable interest rate so that it will not skyrocket to higher interest rates they can no longer afford. In many cases, modifying loans is the only way to help borrowers keep their homes. But despite what lenders state publicly, the results of CRC’s survey show they are not doing this.
Only one mortgage counselor reported in CRC’s survey that loan modification was a very common outcome presented to borrowers. In fact, counselors reported that the industry as a whole is not consistently modifying loans for long-term affordability, as they claim.
When lenders do modify loans for borrowers in early delinquency, or facing unaffordable rate resets, survey results show they are not offering fixed rates for the long term. Counseling groups responded that lenders are only willing to fix interest rates for one year at a time. These short-term modifications are unlikely to solve borrowers’ problems, and will most likely only delay the situation, Stein says.
CRC’s survey also revealed that most counseling agencies do not see lenders reaching out to borrowers before they face problems from rising rates and monthly payments. A surprising 24 of the 33 respondents said that in their experience, the industry as a whole is not contacting borrowers before delinquency.
For more survey findings and analysis, visit www.calreinvest.org or contact Kevin Stein at (415) 864-3980 or kstein (at) calreinvest (dot) org.
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
© 2007 PR Newswire. All Rights Reserved.
