BOSTON (Reuters) - Challenges facing homeowners today are so manifold that even lenders’ best efforts to stave off foreclosures may never work, according to a major lender and a community group on Monday.
The combination of falling home prices, rising payments on adjustable mortgages and higher unemployment in some regions have created problems so diverse that single solutions — such as widening the Federal Housing Administration’s reach — will not be enough, said Mary Coffin, an executive vice president for Wells Fargo & Co.’s (WFC.N) loan servicing group.
“You have so many factors happening at once that there are some customers (the industry) cannot help,” Coffin told Reuters at the Mortgage Bankers Association annual meeting here. The industry must be careful about making blanket statements suggesting it will be able to help all borrowers prevent foreclosure, she said.
But the banding together of major servicers, including Wells Fargo, to improve borrower counseling and information is a start toward stanching rising foreclosures, she said. The initiative, HOPE NOW, aims to contact troubled borrowers before they become so delinquent in their payments that foreclosure is almost unavoidable.
Just getting the customer to call is a big frustration for Wells Fargo, which found 30 percent of borrowers it services have contacted the company, she said.
Sharing and coordinating information between the servicers in HOPE NOW, which represent 60 percent of all outstanding home loans, is another important step for homeowners whose loan payments are slated to rise in 2008, she said. Consistent data will allow lenders to better determine whether a loan headed for foreclosure can be modified to easier terms, she said.
Assumptions that loans cannot be modified because they are locked up as collateral for mortgage-backed securities are wrong, she said.
Out of thousands of loans, “I can probably count on two or three fingers the contracts that don’t allow us to modify because of securitization,” she said. Wells would also contact investors in those few cases to negotiate, she added.
Lenders and community groups may be successful in avoiding foreclosures, but options may still not keep people in their homes, according to consumer group NeighborWorks America. Some borrowers who because of falling house prices owe more than their home is worth are able to sell their home to the bank at the appraised value, freeing themselves of the debt, said Douglas Robinson, a spokesman for NeighborWorks.
“Not everyone can be helped in the way they want,” he said. “But our goal is to avoid foreclosure. They hurt everybody.”