Foreclosures, Delinquencies Exceed Loan Modifications

Foreclosures and mortgage loan delinquencies are outpacing loan modifications, despite the Obama administration's efforts to help financially pressed Americans avoid losing their homes.

Nearly half a million loan modifications were completed in the first quarter of 2009, according to the Center for Responsible Lending (CRL), but that number was far exceeded by nearly 3.5 million foreclosure starts and serious delinquencies in the same period. The agency predicts that without significant government intervention, foreclosures will reach 13 million over the next five years.

"Continuing this same course would be disastrous," said Mike Calhoun, president of CRL. "The challenge of closing the gap between the foreclosure epidemic and foreclosure prevention represents a major public policy issue that will affect all Americans."

Although the number of loan modifications has increased over the past year, the CRL says it hasn't kept up with the number of foreclosure starts and additional delinquencies. However, the rate of loan modifications is increasing more quickly that the other two despite not keeping up in terms of absolute numbers.

There were approximately 500,000 new foreclosures and 1.5 million serious delinquencies (defined as mortgages 60 days or more past due) in the first quarter of 2008, according to charts provided by CRL, compared to about 200,000 completed loan modifications. By comparison, there were about 750,000 new foreclosures and 2.6 million serious delinquencies in the first quarter of 2009, compared to 500,000 completed modifications.

The figures do not reflect the approximately 200,000 trial loan modifications initiated under the government's Making Home Affordable Program, the first of which are just becoming finalized now following a required three-month trial period. The CRL reports that approximately 1 homeowner in 10 is currently behind on their mortgage payments and that 1 in 5 is "underwater" on their mortgage, that is, owes more than their home is currently worth.

The organization is calling upon Congress to enact a number of consumer protections, including the creation of a Consumer Financial Protection Agency, as outlined in the proposed Consumer Financial Protection Act of 2009, and requiring lenders to determine a borrower's ability to repay a mortgage before issuing one.