Foreclosure Alternatives Reducing Mortgage Delinquency
By: Michael Powers
Recently published Hope Now statistics are showing a declining mortgage delinquency rate. Both loan modification and foreclosure alternatives have contributed to reduce foreclosure starts in 2013. While the mortgage crisis is not over, these statistics show that fewer homeowners are falling behind on their mortgages. Perhaps more importantly, the statistics show that more delinquent homeowners are finding solutions that allow them to avoid foreclosure. According to statistics published by Hope Now at the end of October, 2013, a little more than 2 million single-family mortgages are 60 days or more past due, down 20% from 2012.
Better still, Hope Now reported only 290,100 foreclosure starts in the third quarter of 2013. That is down 42% from the same quarter in 2012. This dramatic decline suggests that more more foreclosures are being prevented by loan modifications and foreclosure alternatives. Many states have passed legislation which give homeowners more legal rights and causes of action. As a result, more lenders and servicers are choosing to avoid the potentially costly scrutiny of foreclosure proceedings.
Homeowner Bill of Rights Working
The Homeowner Bill of Rights (HBOR) statutes were born out of the principles set forth in the National Mortgage Settlement. Most of these statutes protect homeowners from deceptive practices like “dual-tracking”. Many lenders are choosing more aggressive loan modifications and foreclosure alternatives to avoid the potential liabilities of the HBOR provisions. In California, for example, the HBOR calls for penalties on a “per instance” basis. For lenders holding mortgages with potential chain of title issues, the foreclosure process can be a potential minefield.
Hope Now reports the total number of loan modifications for 2013 (as of Oct. 30) was nearly 680,000. Unfortunately, the report also shows approximately 545,000 foreclosure sales. Missing from these numbers, however, are the mortgages that were resolved by means of a legal settlement. These days, more and more lenders are reaching settlements with foreclosure attorneys which are not a part of any identifiable loan modification program.
Overall, the 2013 statistics showed that the pace of loan modifications slowed during the first three quarters, when compared to the same quarters of 2012. This trend can be interpreted as resulting from two meaningful factors. The mortgage delinquency crisis is beginning to subside, and more troubled borrowers are reaching resolutions outside of the major loan modification and mortgage relief programs.