Lenders' aid for borrowers is seen lacking
Only one in four subprime borrowers behind on payments in January was working with their mortgage company to avoid foreclosure, the same share as in October, according to a report from a consortium of state regulators.
Regulators are eager to quantify the impact of the promises and programs hurled in recent months at the rising tide of foreclosures, to guide decisions about what else should be done.
The data suggest the industry's efforts to help borrowers have yet to make headway.
The consensus among regulators: Signs of progress. More needed.
"I think that they've put additional staff on this, but not enough," said Iowa Attorney General Tom Miller, a leader of the consortium. "And they need to respond more quickly. And it is a race against the clock. More needs to be done, but there's a chance that it can be."
Several mortgage industry trade groups have said that companies are increasing efforts to help borrowers. The industry also says the reg ulators' data are misleading because a large share of borrowers are beyond help: They do not respond when contacted, or they got help and then returned to the brink of foreclosure.
The report aggregates data from 13 of the 20 largest mortgage servicers, the companies that collect monthly payments and carry out foreclosures, representing about 58 percent of all subprime loans. The other seven companies have refused to report data to the State Foreclosure Prevention Working Group, which includes regulators from 37 states.
Slightly more than one-quarter of subprime borrowers were behind on payments as of January.
Because the number of borrowers needing help has grown rapidly, the report reflects a similar growth in the number of borrowers getting help. But the number of borrowers losing homes to foreclosure also continues to climb.
The bottom line: In January the surveyed companies resolved, at least temporarily, the problems facing 89,548 subprime borrowers. The companies foreclosed on 133,540 borrowers during that month.
Among borrowers who got help, about one-quarter continue to get the most effective kind: A reduction in their monthly mortgage payments. Alternative kinds of help, such as a deferment of overdue payments, are less effective and often result in the borrower soon returning to the verge of foreclosure.
To encourage modifications, the report recommends that states slow the foreclosure process. Massachusetts will do so on May 1, when a new law takes effect requiring mortgage companies to give borrowers 90 days to clear an overdue balance before attempting to foreclose.
Attorney General Martha Coakley, a member of the consortium, said the delay was not an answer in its own right, but it might help to encourage companies to find answers.
"I think our concern is to impress upon lenders that it's in their best interest to do a restructuring," Coakley said. "We want to make an effort to remind consumers but also lenders that the time is required, and we want them to make an effort to work things out."
The report found a wide disparity in the performance of the servicing companies, measured by the share of troubled borrowers who got help. The results ranged from 6 percent to 46 percent. The report does not name the companies, instead assigning them numbers as a condition of their participation.
Regulators said they were eager to understand the wide disparities, and to encourage laggard companies to improve their performance. But one possible explanation won't be easily overcome: Some large servicing companies are themselves in deep financial trouble, or on the verge of selling their operations.
Binyamin Appelbaum can be reached at bappelbaum@globe.com.
