Sunday, April 06, 2008
Lenders Swamped By Foreclosures Let Homeowners Stay
The number of borrowers at least 90 days late on their home loans rose to 3.6 percent at the end of December , the highest in at least five years, according to the Mortgage Bankers Association in Washington. That figure, for the first time, is almost double the 2 percent who have been foreclosed on.
Banks are reluctant to foreclose on homeowners for a variety of reasons that include the cost, said Peter Zalewski, real estate broker and owner of Condo Vultures Realty LLC, a property consulting firm in Bal Harbour, Florida.
Legal fees and maintaining a vacant property while paying the mortgage, insurance and taxes can add up to as much as 15 percent of the value of the home, and it may take months for the foreclosure to work through the legal system, he said.
``The end result is taking back a property that the bank will have to manage, rent out and or sell,'' Zalewski said.
In many cases, lenders also have to foot the bill for fixing up vacant homes that have been vandalized.
``What are the banks going to do?'' Fishman said. ``They don't want the house. They have a mortgage for $1 million and the house is worth $750,000.''
Efforts to keep borrowers paying their bills have slowed the foreclosure process, Mark Rodgers, a spokesman at CitiMortgage, a division of New York-based Citigroup Inc., said in an e-mail message.
``In a number of cases, we have delayed foreclosure proceedings to allow our loss mitigation teams additional time to explore potential solutions to keep distressed borrowers in their homes,'' Rodgers said.
Joe Ohayon, vice president of community relations for Wells Fargo Home Mortgage in Frederick, Maryland, a unit of San Francisco-based Wells Fargo, said trying to modify loan terms case by case adds time to the foreclosure process.
``Foreclosure is only a last resort after all available options for keeping the customer in the home have been exhausted,'' Ohayon said in an e-mail message.
Olivia Riley, a spokeswoman at Seattle-based Washington Mutual, said in an e-mail that the company's goal is to keep customers in their homes ``with payments they can afford.''
Representatives for Calabasas, California-based Countrywide, the biggest U.S. mortgage servicer last year, didn't respond to requests for comment.
Few mortgage companies will admit they allow homeowners to stay in their homes without paying their bills.
``No servicer will say you can live rent-free for six months, go ahead,'' said Paul Miller, a mortgage industry analyst at Friedman Billings Ramsey & Co. in Arlington, Virginia. ``Eventually, the servicers will clear these guys out.''
Homeowners usually get 90 days to resume paying before foreclosure proceedings begin with the filing of a complaint or notice of non-payment.
State laws determine the length of time between the filing and an auction of the house. In most states, it's two to six months, according to Foreclosures.com. In Maine, it can be up to a year and in New York, 19 months; in Georgia, it's as quickly as one month, and in Nevada, it can be 35 days, according to the database.
Borrowers in California who fight foreclosure can stretch the process to 18 months, said Cameron Pannabecker, chapter president of the California Association of Mortgage Brokers and president of Cal-Pro Mortgage Inc. in Stockton.