Foreclosure filings in record jump
Hope Now reports a 20% increase in initial foreclosure filings during March. But there was a steep drop in bank repossessions.
NEW YORK (CNNMoney.com) -- Lenders continued to rewrite troubled mortgages at a fast clip during March, but the weakening economy still sent foreclosure starts soaring to a record high.
March mortgage workout results announced on Thursday by Hope Now - a coalition of mortgage lenders, servicers, investors and community groups put together to fight the foreclosure plague - were a decidedly mixed bag.
Approximately 134,000 mortgages were rewritten by Hope Now members, which is nearly 20,000 more than the average since September. Another 115,000 at-risk borrowers were granted repayment plans, for a total of nearly a quarter of million troubled mortgages addressed for the month.
Repayment plans merely postpone payments for delinquent borrowers without making them any more affordable. Mortgage modifications are changes in the terms of loans that reduce or freeze interest rates, extend the life of the loan, reduce loan balances or any combination of those three, to, ideally, lower the amount borrowers pay monthly. Modifications are considered more effective that repayment plans.
"The lending industry is steadily working out solutions for homeowners and keeping as many as possible in their homes," said Faith Schwartz, director of Hope Now. "I expect that these numbers will continue to increase as servicers work with the Obama Administration to implement its Homeowner Affordability and Stability Plan."
Despite the efforts, however, more homeowners fell into default in March. Servicers initiated foreclosure proceedings against 290,000 mortgage borrowers, a jump of nearly 20% from February's 243,000, and the highest monthly total since the coalition began tracking data in mid-2007. Starts have risen by more than a third since January.
On the other hand, completed foreclosure sales, transactions in which lenders have actually taken back homes from defaulting borrowers, dropped by 39% in March. Banks repossessed only 53,000 homes compared with 87,000 taken over during February.
Since the mortgage meltdown hit in July 2007, 1,447,866 homes have been lost to foreclosure.
Michael Bright, a chief statistician with Hope Now, attributed the sharp reduction in completed foreclosures to servicers suspending foreclosures as they geared up to implement the administration's refinance and mortgage-modification program.
"It's too early to say this is a trend," he said in a press release. "But anecdotal reports from servicers do indicate that they are taking this extra step to help homeowners who qualify stay in their homes."
Once the program is fully in place, servicers will have more tools to be able to make successful modifications to unaffordable mortgages. In the meantime, they're allowing a kind of grace period for homeowners until the government program can be applied to individual cases.
"Our counselors have been getting hardly any answers for weeks," said Mark Seifert, director of the East Side Organizing Project in Cleveland, which advocates mortgage workouts for hundreds of delinquent homeowners a month. "The servicers have been sitting on their hands."
But the impact of the Homeowner Affordability and Stability Plan should begin to be felt soon, according to Schwartz, who thinks it going to change - and improve - the mortgage landscape.