AGs Say Too Few Get Forbearance.

Byline: Jennifer Harmon

Washington-A new report says too many homeowners face foreclosure without receiving meaningful assistance from their mortgage servicer.

In its third "Analysis of Subprime Mortgage Servicing Performance," the State Foreclosure Prevention Working Group concluded things are getting worse as the number of delinquent loans, prime and subprime, increases. Industry measures to keep homeowners out of foreclosure have slipped, according to the group, which is made up of state attorneys general and state banking regulators.

Based on data collected from February through May, the report said eight out of 10 seriously delinquent homeowners are not on track for any loan workout or loss-mitigation assistance to enable them to avoid foreclosure, a higher percentage than the group found in its April report. Previously, seven out of 10 are not on track for any loss-mit outcome.

"Servicers appear to have reached the 'low-hanging fruit' of subprime loans facing interest rate resets, while not developing effective approaches to address the bulk of subprime loans which are in default before interest rate resets," the report said. "Based on the rising number of delinquent prime loans and project numbers of payment-option ARM loans facing reset over the next two years, we fear that continued reactive approaches will lead to another wave of unnecessary and preventable foreclosures."

While banks and Wall Street firms continue to report record writedowns of mortgage loan portfolios and securities, the losses do not appear to be flowing down to homeowners in the form of sustainable loan modifications, said Iowa attorney general Tim Miller, a founder and leader of the group. Since October 2007, the group has been collecting data from the largest subprime mortgage servicers. The group is led by representatives of the AGs ...