The California Department of Corporations reported Tuesday that state-licensed lenders and loan servicers modified 38,085 home loans in the third quarter to help homeowners avoid foreclosure, up 85% from the first quarter, when the department first began detailed tracking of such efforts.
Most loan modifications involved cutting or freezing the interest rate on the loan. For example, in September lenders reduced the interest rate to the starter rate or lower in 20% of the deals they worked out with borrowers.
The 18 companies that completed the survey, including Countrywide, account for more than half of loans outstanding in the state. Lenders generally did not lower the principal owed, doing it only 0.28% of the time in September. Since January they have consistently done it 1% or less of the time.
Credit counselors have told me lenders don’t like to reduce the amount owed, because that means writing it off and never seeing it again. A reduction in the interest rate is viewed as temporary. And if a lender cut the balance, the borrower might default again down the road.
| Workouts | Jan-08 | Sep-08 |
|---|---|---|
| Modification | 36.3% | 50.5% |
| Paid-in-Full | 22.1% | 9.0% |
| Forbearance Plan | 19.2% | 11.1% |
| Paid Current | 12.9% | 11.5% |
| Short Sale | 5.7% | 13.4% |
| Other | 3.4% | 4.3% |
| Deed-in-lieu | 0.4% | 0.1% |
The table shows how loan modifications compare with other ways to avoid foreclosure, showing percentages of each type for January vs. September. One fact that struck me: Short sales have more than doubled since January as a percentage of loan workouts (industry lingo for avoiding foreclosure), reaching 13.4% in September. Looks like short sales, when a lender allows a borrower to sell a home for less than the debt on it, are becoming more acceptable.
All these completed foreclosure prevention techniques totaled 78,630 in Q3, an increase of 44.6% from Q1.
Yet foreclosures still jumped 30% in the same period to 44,477 in Q3. (Remember this is just for state-licensed companies; the total of all foreclosures in California was 79,511 in Q3, according to DataQuick.)
Overall, the data, which you can find HERE, paints an interesting picture. One final note: The paid-in-full totals dropped from 22% in January to 9% in September, meaning it is much harder to refinance out of a problem.
And here’s more from the foreclosure files…
- O.C. foreclosures to drop in ‘09
- Orange County twice home to reckless lending
- Banks seized 17% fewer O.C. homes in September
- Number of O.C. distressed properties down 2.6%
- Wells Fargo uses varied approach to selling O.C. foreclosures
- Video: Ed McMahon “raps” for O.C. credit-report firm
- O.C. foreclosure notices decline 64%
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It pays not to pay your bills.
Some of the people who are in this situation have lost their jobs and are living on unemployment. It’s not that they don’t want to pay their bills, they don’t have to capacity at this time. The economy is hurting many people right now. If it isn’t hurting you, then great. But let’s show some empathy to the people who need some help so they won’t lose their homes.
this is ridiculous….
nobody put a gun to any of these buyers heads….
i love how we reward reckless investing…from wall st. to main st.
hope i get my bailout when i make a dumb decision later down the road!
Does this mean that I can reduce my interest rate from %5.75 30-year fixed to %5.50 30-year fixed, by threatening to leave the current lender? Do I have that kind of leverage? I have lived at the residence for 8-years and never missed a mortagage payment, and my income has risen 45% during the last 3-years due to changing employers.
I know for a fact that our local elected officials in San Mateo County legally did not have a clue because the one book they needed in order
to know what the heck was going on within the financial markets was stolen out of both the Daly City and the South San Francisco public libraries. I am proud to say this, so what excuse do your sorry elected officials have to say, for placing this great nation deeper, into debt?
“Saving The Sun: A Wall Street Gamble To Rescue Japan From Its Trillion-Dollar Meltdown,” by Gillian Tett, c. 2003.
It is not that we don’t want to pay our bills. Some of us lost our jobs or had major hardships the prevented this from happening. My husband lost his job and had to take a $30.00 an hour pay cut because there is nothing out there. It is either get help or have more homes on the market that will reduce the value of neighborhoods. We are working on get a modification with our lender (yes we want to stay with our lender) after trying to get refinanced, selling our vehicles and liquidating a lot of our assets. I really wish that people had a little be more compassion and not group those of us who are wanting to keep our “home” with the ones that are being irresponsible because they want something for nothing.
I’m assuming Lisa is voting for Obama….
There used to be this thing called saving money a long time ago. I vaguely remember people doing this in case things turned down for them - I think they called it “saving for a rainy day???” I don’t know why anyone would do that now since they would be bailed out by the government (i.e., taxpayers)….
TO: DavyJ
You would need to be in default (already past due) or demonstrate that you are in danger of “imminent default” (meaning you will go late soon because of a curtailment of income, etc.) to get the lender to approve a temporary* rate reduction. Is it really worth the major drop in your credit score for missing payments just so you can demand a .25% temporary rate reduction? You should be happy that you have a good rate and can afford your home…
* While all banks operate differently, most of the Modifications are “temporary”… the rate will step-up each year assuming the borrower’s hardship will pass, and they can afford the higher/original rate again.
Lisa and Itgirl, I think the problem here isn’t with people that lost their jobs the problem was people getting homes they couldn’t afford tapping all the equity out of their homes or those that made irresponsible decisions based on the hope that they could refi in two years, these are the people that put in motion the events that cause all these people to lose their jobs, that cause our economy to take a major dump.
These people outnumber those that truly deserve help due to loss of their jobs, people need to distinguish between the two.
The sad thing is the people that cause this mess blame the mortgage company, I am not saying the mortgage companies are not at fault I am saying the people that signed the docs for these loans are just as to blame as the mortgage companies that tossed their good underwriting practices out the window so they could originate these bad loans.
Personally I feel only those that truly deserve help should get it. The ones that ordered the house on the side or went ATM mad on their house need to fend for themselves.
Most of these workouts will go back into foreclosure in three months.
And to the people who lost their jobs, if it was in the RE/mortgage industry, you deserve no sympathy because you should’ve seen this coming. If not then I do feel bad.
$30 an hour pay cut? wow, must be sad to have to live like everyone else. . Better give up the botox too.
Turn in the leased car too.
ITGirl & Lisa,
How much compassion should I give you if you HELOC’ed the heck out of your home? Or decided to have a lavish lifestyle the last few years? If the job losses were truly legit and you didn’t do above what most people did during the boom, then hopefully you can dip into your emergency savings fund. If you didn’t have one of those, then my well of compassion definitely is dry.
Its true that many people have lost thier jobs and all they have is bulk of pending bills in their hand. I dont know how will they manage to save their homes!! Isnt there any solution for these people to get rid of this problem????