Foreclosures spike - so do mortgage-help plans
Lenders are fixing more loans, but the number needing assistance is soaring.
NEW YORK (CNNMoney.com) -- Lenders have helped an increasing number of mortgage borrowers to get current on payments and stay in their homes, but the tide of foreclosures is still rising.
In February, nearly 250,000 homeowners received either mortgage modifications or repayment plans from their lenders, according to Hope Now, the coalition of lenders, investors and community advocacy groups put together to combat the foreclosure plague.
About 134,000 of the workouts completed were mortgage modifications, which typically lower the interest rate on loans, lengthen mortgage terms or reduce principal owed to make loans more affordable. Modifications are considered more comprehensive and effective than repayment plans, which simply tack the late payments on to the end of the loan but don't reduce payments.
"The mortgage lending industry is responding to the needs of its customers and offering solutions that are appropriate to the current market and economic conditions," said Hope Now's director Faith Schwartz.
But in spite of these efforts, the number of foreclosures started in February rose to 243,000 from 217,000 in January. About 87,000 homes were repossessed by banks during February, a 28% jump from the 68,000 foreclosures completed in January. Since the mortgage meltdown hit in July 2007, 1,395,044 homes have been lost.
February was the second straight month of sharply higher foreclosures; prior to January, the problem appeared to be easing. Foreclosures declined to 69,000 in November from 77,000 in October and then dropped again to 56,000 in December.
But the report could have been much worse, considering the nation's deteriorating economic picture, Schwartz said. "We're shedding 650,000 jobs a month," she said. "But there's more flexibility [by the lenders]. They're offering more forbearance in response to job losses."
The Obama administration's foreclosure prevention initiative could send mortgage modification numbers higher in the coming months, but it will take time. "We won't see a spike right away," said Schwartz. "[Under the program] It takes 90 days to complete a modification. Over the next three months we'll start to see some pull-through."