LOAN WORKOUT AGREEMENTS SLOW TO COME FOR MANY DELINQUENT BORROWERS!
HOWEVER, SOME LENDERS ARE REVISING LOAN TERMS TO CREATE MORE AFFORDABLE MONTHLY PAYMENTS!
Last Fall, The Bush Administration created the "Hope Now Alliance," a coalition of larger lenders who developed a plan to help delinquent homeowners avoid foreclosure, by developing new forbearance and loan restructuring agreements, as well as delays to the foreclosure timeline.
Six months later, the program shows somewhat mixed results.
According to the New York- based State Foreclosure Working Group, released last week, 70% of borrowers who are behind two months or more in their mortgage payments state they have yet to negotiate a work-out agreement with their lenders, despite trying to reach them. Many of these delinquent loans then head to foreclosure. Several of our distressed clients here in Chicago and our suburbs complain of unresponsive lenders, and hard to contact customer service reps.
Mortgage servicers nationwide negotiated 50,000 loan modifications in favor of troubled borrowers last January, compared to early October, 2007, before the program began. In the same period, however, the number of sub-prime loan delinquencies outpaced borrowers helped - increasing by 90,000.
There is a bit of a silver lining, however. Several lenders are actually renegotiating loan terms, perhaps extending out the loans, or adjusting interest rates, to make the troubled borrowers' home loans more affordable for the life of the loan. This is a longer-term view than forbearance or a repayment plan, which would not make a permanent reduction in the scheduled payments, increasing the likelihood that the borrowers would fall back into delinquency in the future.
See J.W. Elphinstone's article in last Sunday's Chicago Tribune for more information.
DEAN MOSS & DEAN'S TEAM CHICAGO
