Delinquent Borrowers: 57 Percent Unaware of Workout Options, Says New Freddie Mac/Roper...

Delinquent Borrowers: 57 Percent Unaware of Workout Options, Says New Freddie
Mac/Roper Survey
Foreclosure Avoidance Awareness Largely Unaffected by Market Problems

MCLEAN, Va., Jan. 31 /PRNewswire-FirstCall/ -- Despite a surge in news
reports about mortgage delinquencies, foreclosure rates and loan
modifications, 57 percent of the nation's late-paying borrowers still don't
know their lenders may offer alternatives to help them avoid foreclosure, says
a new survey from Roper Public Affairs and Media -- a leading international
market research firm, and Freddie Mac (NYSE: FRE) one of the nation's largest
purchasers in residential mortgages.
That represents a slight improvement from 2005 when the first Freddie
Mac/Roper borrower survey found 61 percent of delinquent borrowers didn't know
their mortgage lender offered workout options. The survey also found an
increase in the percentages of delinquent borrowers who recall their lenders
reaching out to them (86 percent) and who in turn reached out to their lender
(75 percent) to discuss workout options.
The new Freddie Mac/Roper poll also says the percentage of delinquent
borrowers aware there are housing counselors they can talk to about their
mortgage has increased from 36 percent in 2005 to 44 percent today.
"This new survey shows that efforts to get borrowers to call lenders and
counselors are starting to work, but that too many at-risk borrowers are still
unaware their servicers routinely provide alternatives that can help them stay
in their homes," said Ingrid Beckles, Freddie Mac's Vice President of
Servicing and Asset Management. "This fact underscores the importance of
convincing borrowers to pick up the phone, call their servicer, and find out
whether they can avoid foreclosure." Servicers are firms that collect monthly
mortgage payments on behalf of investors such as Freddie Mac.
By working with servicers, Freddie Mac now helps an average of 1000
troubled borrowers a week avoid foreclosure through forbearances (which can
delay or reduce payments), repayment plans, loan modifications (that
restructure payment terms) or other workout options. (Borrowers can find a
comprehensive description of workout options at the Avoiding Foreclosure page
of the Freddie Mac website.)
"One problem is that servicers are unable to contact borrowers in more
than half of the foreclosures we see at Freddie Mac," said Beckles. "That's
why it is imperative to closely track borrower awareness of workout options so
the industry and the government can evaluate and enhance their efforts to get
more borrowers talking to their servicers about avoiding foreclosure."
In addition to finding that 57 percent of delinquent borrowers were
unaware of their workout options, the new survey found awareness increased
when some specific options were mentioned. For example, delinquent borrowers,
when prompted, said they knew about repayment plans (63 percent), modifying an
adjustable rate mortgage into a fixed rate loan (68 percent) and paying off
their mortgage in a single lump sum (78 percent).
The survey also found 54 percent knew missed payments could be added to
the loan balance through a loan modification and 52 percent knew mortgage
terms could be extended under some circumstances. The survey also finds that
only 43 percent are aware of forbearances or a temporary suspension of the
mortgage payment or deed-in lieu of foreclosure (41 percent).
The Freddie Mac/Roper survey found that the need for borrower education
programs cuts across racial, ethnic and gender lines, underscoring the need
for financial literacy programs like Freddie Mac's CreditSmart(R),
CreditSmart(R) Espanol, and CreditSmart(R) Asian programs.
"The survey finds that people who are behind in their mortgage payments
are in many ways just like all other homeowners," said Dr. Christopher Fleury,
a Senior Research Director at Roper. "Even though they have fallen behind in
their mortgage payments, they, too, almost unanimously recognize the
importance of having a good credit rating, of paying their bills on time, and
of saving money each month."
Why Some Borrowers Don't Contact Servicers
On the positive side, 86 percent of delinquent borrowers reported
awareness of their lender's effort to contact them in the new survey compared
to 75 percent in 2005, and the percentage of borrowers who actually contacted
their lenders also increased, from 68 to 75 percent, during the same period.
A majority (59 percent) of delinquent borrowers said their contact with their
servicers was helpful although one in four said the experience was
"intimidating" or "confusing".
One in four delinquent borrowers chose not to accept their lender's
invitation to discuss workout options. But, the percentage that said they
believed there was no reason to call or nothing the servicer could do to help
fell from 48 percent in 2005 to just 33 percent in 2007. On the other hand,
the percentage that chose not to call because they said they didn't have
enough money to make a payment rose from 7 percent to 16 percent and the
percentage that denied they were having trouble making their payment doubled
from six to 12 percent.
When asked to suggest how servicers could make communication easier,
answers given by delinquent borrowers included eliminating automated phone
systems (8 percent), providing more specific information (10 percent) and
speaking to a live person (14 percent).
Internet, Family/Friends Gain as Mortgage Information Sources
When it comes to looking for information about managing mortgages and
avoiding default, the 2007 survey found a slight shift from traditional
information sources -- like financial institutions and mortgage lenders -- to
other sources such as the Internet and family or friends.
Specifically, one-in-four delinquent borrowers (25 percent) selected the
Internet as their first choice for mortgage information, almost twice as many
as in 2005 (13 percent). The percentage consulting their families and
friends also doubled to 14 percent in 2007 from eight percent in 2005. The
percentage of delinquent borrowers turning to credit and debit counselors rose
marginally from five percent to eight percent over the same period.
Nevertheless, six out of ten delinquent and current borrowers in the 2007
survey said their first stop for mortgage default information would be a bank
or mortgage lender, virtually unchanged from 2005.
At the same time, the survey found delinquent borrowers conflicted about
their lenders, with significant percentages saying financial institutions and
similar financial institutions are a hassle to deal with (83 percent) and
don't want to work with people who are struggling financially (73 percent).
On the other hand, clear majorities also said they feel comfortable contacting
their lenders (77 percent) and believe their lenders treat them fairly (84
percent) and provide helpful information on a variety of financial matters (81
percent).
"The survey results show that many borrowers have ambiguous feelings about
financial institutions in general," Fleury said, "although homeowners tend to
be more positive about their own bank."
"HOPE hotline is working"
The survey also asked borrowers about their awareness of a national public
awareness campaign aimed at encouraging borrowers to call the HOPE hotline at
888-995-HOPE. The Ad Council, NeighborWorks America, the Homeownership
Preservation Foundation (HPF), Freddie Mac and a coalition of mortgage
investors and lenders originally launched the campaign in June 2007 to drive
calls to HPF's HOPE Hotline.
According to the survey, nearly one in four delinquent borrowers (23
percent) report seeing the ads and one in ten (9 percent) who are aware of the
HOPE Hotline have made the call. HPF says the toll-free number now receives
between 1500 and 3000 calls per day, up from 250 per day one year ago. More
than 200,000 homeowners have called the hotline since June 25 of last year,
according to HPF.
"The public service campaign is working," said Ken Wade, CEO of
NeighborWorks(R) America. "Every day, through our partnership with the
Homeownership Preservation Foundation, we're helping thousands of homeowners
in financial stress take steps to prevent foreclosure with the 888-995-HOPE
hotline. Moreover, those homeowners who call and need additional counseling
are being referred to local NeighborWorks organizations for one-on-one, face-
to-face foreclosure prevention counseling."
"We're pleased that so many more people know about the HOPE Hotline and
the assistance we offer," said Colleen Hernandez, President and Executive
Director of Homeownership Preservation Foundation. "Homeowners need to know
that they're not facing this issue alone. Contacting their mortgage company
or a trusted resource like the HOPE Hotline is the first step to avoiding
foreclosure. Help is available."
The 2007 Freddie Mac/Roper survey results are based on responses from 2411
adult homeowners, including 1,004 delinquent borrowers more than one month
late. Roper conducted the survey by telephone from October 23 through
November 14. The survey has a three percent margin of error.
Freddie Mac is a stockholder-owned corporation established by Congress in
1970 to support homeownership and rental housing. Freddie Mac purchases
single-family and multifamily residential mortgage and mortgage-related
securities, which it finances primarily by issuing mortgage-related securities
and debt instruments in the capital markets. Over the years, Freddie Mac has
made home possible more than 50 million times, ensuring financing for one in
six homebuyers and more than four million renters.
SOURCE Freddie Mac

Brad German of Freddie Mac, +1-703-903-2437