Record number of borrowers get mortgage help
Fewer foreclosures are going all the way through to auction sales and bank repossessions, according to coalition.
NEW YORK (CNNMoney.com) -- Mortgage lenders helped save a record 225,000 at-risk mortgage borrowers from losing their homes during October, according to a report issued Tuesday by a coalition of lenders, mortgage servicers, investors and counselors assembled to fight the foreclosure plague.
The coalition, Hope Now, said the number was up from 212,000 in September.
It claimed its members have helped 2.7 million homeowners have keep their homes since July 2007, with 1.7 million of those coming in the past 10 months alone.
"Our efforts to streamline the foreclosure prevention process are clearly working," said Faith Schwartz, the coalition's director.
Workouts offered at-risk mortgages fall into two general categories.
In the first, called repayment plans, lenders grant delinquent borrowers extra time to make up missed bill. Borrowers may be allowed to pay more each month for a set number of months, for example, or payments can be added to the end of the loan's term.
Of the 225,000 workouts arranged in October, 122,000 were of this type.
The second kind of workout is called a mortgage modification because the actual terms of the contract have to be rewritten. Changes can include freezing or lowering interest rates, extending the life of the loan - say from 30 years to 40 years - or even forgiving some of the balance owed.
Critics say this is a much more viable solution to payment problems because it can lower payments enough to make them affordable.
The number of modifications accomplished over the past three months through October increased 24% over the previous three months while repayment plans were up only 9.8%.
"The growing use of loan modifications is not an accident," Schwartz said. "The U.S. economy is still troubled and that means that changing the terms of a loan is an increasingly appropriate way to keep more homeowners in their homes. Hope Now members are likely to continue to consider them as long as the broader economy continues to struggle."
One sign that these efforts may be starting to pay off came in the data for the number of people who lost their homes during the month. That totaled a bit more than 77,000, an approximately 10% improvement over September when nearly 86,000 people had their homes repossessed.
Many lenders have expanded their mortgage modification efforts over the past few months. In August, the Federal Deposit Insurance Corp. announced it would modify many of the loans it is administrated since its takeover of IndyMac Bank.
The FDIC said it would lower payments to no more than 38% of gross income for at-risk borrowers by lowering mortgage rates, extending terms or deferring some of the principal.
That was followed by similar announcements of added help for, among others, Countrywide-Bank of America , Chase Mortgage and Citibank borrowers, as well as a new mortgage rescue plan for borrowers of Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500)-backed loans.