Ohio “Big Player” in Solutions for Foreclosure Mess; Leader Calls for More Action by States

ePluribus Media OhioNews Bureau

COLUMBUS, OHIO: State officials representing a group formed last year to share ideas on how to prevent unnecessary foreclosures said Tuesday that many lenders of subprime mortgages are falling behind in modifying troubled loans and singled out work performed by the Ohio Attorney General as an example of the kind of action states need to take in lieu of waiting for help from federal regulators or the Bush White House.

Highlights of findings contained in a report on loss-mitigation by mortgage loan servicers, released by the State Foreclosure Prevention Working Group, a joint effort of state attorneys general, bank regulators and the Conference of State Bank Supervisors (CSBS), the nation’s leading advocate for state banking systems, located in Washington D.C., showed that, despite the launch by the mortgage several months ago of its HOPE NOW Alliance program, designed for pubic awareness, the vast majority of homeowners with seriously delinquent loans are not on track for a loan work-out of any type.

MORE TO DO AS CRISIS GROWS

Iowa Attorney General Tom Miller, who lead a group of conference call participants, including Richard Neiman, New York Superintendent of Banks, Mark Pearce, North Carolina Deputy Commissioner of Banks and John Ryan, CSBS Executive Vice President, said that while some progress has been made, due principally to stepped up efforts by all stakeholders that have increased the number of loan mitigations, the bad news is that number of troubled loans have also increased proportionately.

“We started behind, and continue to be behind,” he said during his opening remarks of the group’s work that started last October. He called for the 20 largest subprime mortgage servicers, only 13 of which participated in the report’s data collection efforts (representing approximately 57% of the subprime servicing market), the group’s second report. The report called for an increase in lender staffing levels, improvements in their willingness to agree to modify current mortgage terms and called for them to reach out to other groups, like neighborhood-based organizations, as a further method to catch up to the growing number of subprime loans that are headed for foreclosure in the coming months.

The report noted the problem created by the refusal of some national banks to provide servicing data and called on the Comptroller of the Currency to encourage national bank servicers to work voluntarily with states in the foreclosure crisis. The OCC said it is collecting monthy mortgage servicing data from some of the nation’s largest national banks.

The State Working Group will continue to work with servicers to promote systematic solutions to modify loans in a more streamlined and efficient manner. Without a systematic approach, we see little likelihood that ongoing efforts will make a serious dent in the level of unnecessary foreclosures.”[CSBS, Analysis of Subprime Mortgage Servicing Performance]

North Carolina’s Pearce said he wished he could report better news, but said that “while a lot of effort has been put in by servicers and government officials, little progress made.” He said that seven of 10 troubled homeowners, those who are 60 days past due in payments, “fell through the cracks” and are not on any track to a loan work-out. He said these numbers represent a “disconnect” between homeowners and mortgage loan servicers.

Pearce said last fall was the time to make homeowners aware of resources available to them, but since that effort wasn’t what it should have been, he says the numbers of subprime loans heading toward foreclosure will just get larger. “We’re still treading water,” he said of the need to have “more robust approaches.”

Asked by the OhioNews Bureau to comment on what Ohio has done, General Miller said, “Ohio has been a big time player in this.” He said the Buckeye State, under the leadership of Attorney General Marc Dann, who has been engulfed of late by sex scandals resulting from alleged misbehavior by friends he hired and the pressure they put on women subordinate to them to have sex with them, “has done most of the work and most of the research on these issues.

In taking a cue from the lead on litigation efforts Dann has tried, General Miller said states need to think more and more about “what litigation to pursue against servicers” who continue to drag their feet on addressing this growing problem.

Dann’s office was asked to comment on Miller’s statements about his leadership on this topic and what strategies or tactics he may employ going forward. No response was received by the time this article was posted.

KEY REPORT FINDINGS

The boldest admonition contained in the report that gathered servicing-performance information from October 2007 through January 2008 was that the “efforts of servicers and government officials to date have not translated into meaningful improvement in foreclosure prevention outcomes.”

• Seven out of ten seriously delinquent borrowers are still not on track for any loss mitigation outcome.
• Data suggests that loss mitigation departments are severely strained in managing current workload.
• Almost two-thirds of all loss mitigations efforts started are not completed in the following month.
• Seriously delinquent loans are “stacking up” on the way to foreclosure.
• For those homeowners receiving loss mitigation assistance, more are receiving loan modifications.
• The State Working Group believes more robust approaches to avoid preventable foreclosures are necessary.
• Developing a more systematic loan work-out system to replace the intensive “hands-on” loss mitigation approach.
• Slowing down the foreclosure process to allow for more work-outs.
  

John Michael Spinelli is a former Ohio Statehouse government and political reporter and business columnist. He now serves as the OhioNews Bureau Chief for ePluribus Media Journal. More ONB archives.

If readers have a news tip or story idea about Ohio politics or government, contact the OhioNews Bureau at: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Photo Credit: cho