Loan servicers are on track to do nearly 3 million workouts this year, but foreclosure starts rose to an annual rate of 3.5 million a year in March, according to the latest numbers from the HOPE NOW coalition of loan servicers.
HOPE NOW said its members modified 391,155 loans during the first three months of the year, a 21 percent increase from the previous quarter and more than double the number of loan modifications achieved in the same period of 2008.
If that pace can be sustained, HOPE NOW loan servicers are on track to do 1.56 million loan modifications this year, up 57 percent from last year’s total of 968,858.
An additional 350,398 borrowers received repayment plans, bringing the total number of workouts during the first quarter to 741,553.
Consumer advocates say that because they lower a borrower’s monthly payments, loan modifications can be more effective in preventing foreclosure than repayment plans, which often involve tacking payments in arrears onto the back end of a loan. But studies have shown that even among borrowers who receive loan modifications, more than half end up in default again.
If 1.4 million repayment plans are also put in place this year — the rate achieved in the first quarter — HOPE NOW loan servicers could do nearly 3 million workouts (loan modifications and repayment plans) this year.
In a statement, HOPE NOW Executive Director Faith Schwartz said she expects the group’s members will actually be able to pick up the pace as servicers work to implement the Obama administration’s Making Home Affordable refinance and loan modification programs.
The bad news is that while completed foreclosure sales fell 39 percent from February to March, to 53,000, foreclosure starts grew 19 percent during the same period, to 290,000. That’s an annual rate of 3.5 million.
RealtyTrac reported on April 16 that a record 803,489 U.S. homes were subjected to a foreclosure-related filing during the first quarter, up 9 percent from the previous quarter and 24 percent from a year ago (see story).
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