Daily Real Estate News  |  October 2, 2007  |   Survey: Aid to Troubled Borrowers is Rare
Lenders and loan servicing companies have told government officials and the media that they are working with borrowers in trouble. But there’s plenty of evidence showing there’s more rhetoric than reality to those claims.

A recent survey of 16 top subprime loan servicers by Moody's Investors Service found that for the first six months of 2007, an average of only 1 percent of loans experiencing an interest rate adjustment, or reset, had been modified.

Moody's did not identify the servicers it surveyed. But borrower advocates are first pointing their fingers at the nation's largest mortgage originator and loan servicer.

''Countrywide is trying to say they are doing workouts, but they are doing them with as little financial sacrifice for the company and as little effort as they can,'' says Sen. Charles E. Schumer (D-N.Y.), a member of the Senate Committee on Banking, Housing, and Urban Affairs.

Critics say that foreclosures are profitable for servicers and lenders. “There is very little oversight of the fees imposed,'' says Michael D. Calhoun, president of the Center for Responsible Lending. ''There are a lot of folks trying to squeeze distressed borrowers.''

Meanwhile, Countrywide insists that it is working to improve the situation. At an investor conference on Sept. 18, Angelo R. Mozilo, Countrywide's chief executive, said the company would be hiring more staff members, who will be based in India, to do home-retention and loss-mitigation work.

''Our No. 1 priority is to help borrowers stay in their homes,'' Steve Bailey, a Countrywide executive, said in a public statement, adding that the company has saved 39,582 mortgages from foreclosure so far this year.

Source: The New York Times, Gretchen Morgenson (09/30/07)