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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

U.S. home foreclosures rise


A house in foreclosure in Pasadena is evidence of the problems in Southern California, where the median price of homes in a six-county area plunged more than 13 percent in December from the same month a year ago, as the national housing slump kept eating away at home values.
 (Associated Press / The Spokesman-Review)
Associated Press The Spokesman-Review

WASHINGTON – The number of new U.S. foreclosures in the third quarter was 60 percent higher than the number of borrowers the industry was able to help, a trade group said Thursday.

Nevertheless, the Mortgage Bankers Association said its analysis shows banks are working hard to reach strapped borrowers to set up loan modifications and repayment plans. Making matters difficult, the group said, is a high proportion of homes owned by speculators and situations in which borrowers didn’t respond to repeated attempts to contact them.

The trade group, which conducted a survey of companies that collect payments for more than 60 percent of outstanding U.S. home loans, said mortgage lenders started 237,000 loan modifications and repayment plans nationwide in the third quarter, compared with 384,000 new foreclosures.

“The industry is doing a good job, and I think we’re going to see these numbers grow,” said Jay Brinkmann, vice president of research and economics for the trade group.

Among the foreclosures, 63 percent involved cases in which borrowers had already defaulted on a previous loan workout plan, didn’t respond to efforts to contact them or didn’t live in the home, the survey found.

On Wednesday, Countrywide Financial Corp. – the nation’s largest mortgage lender – said it helped more than 81,000 borrowers keep mortgage payments manageable last year, part of a stepped-up campaign to stem growing defaults and foreclosures.

Consumer advocates have been skeptical of the industry’s efforts. Kathleen Day, a spokeswoman for the nonprofit Center for Responsible Lending, said the mortgage bankers group consistently “paints a much rosier picture than has proved to be the case.”

The mortgage industry came under fire from consumer groups, lawmakers and regulators last fall after a survey by Moody’s Investors Service in August showed that lenders modified only 1 percent of subprime loans to people with poor credit records.

A follow-up survey by Moody’s found in September that 3.5 percent of loans that reset to higher levels in the first eight months of 2007 had been modified.

Foreclosure prevention is a top priority for policy makers, as 1.8 million subprime mortgages made to borrowers with poor credit are scheduled to reset to higher rates this year and next.

Last month, the Bush administration brokered an agreement with the mortgage industry to freeze rates on certain subprime mortgages for five years to help homeowners at risk of losing their homes when lower introductory rates reset to sharply higher levels. Treasury Secretary Henry Paulson said last week the administration was exploring a significant expansion of the program to help at-risk homeowners.