Roving Group of Mortgage Lenders Out to Halt Foreclosures
With large numbers of homeowners falling behind on their mortgage payments, home loan lender groups across the country are seeking creative ways to keep delinquent customers out of foreclosure.
One of the newest approaches is the “Mod Squad,” a roving 50-person team of problem-solvers who work for Texas-based EMC Mortgage, a subsidiary of Wall Street investment bank Bear Stearns.
Named after a hit TV series from the late 1960s and early ’70s, the Mod Squad consists of experts in Texas mortgage modifications - custom-made workout solutions for borrowers who no longer can afford their mortgages at current rates and terms.
The object is to search for changes in the home loan requirements that will permit borrowers to remain in their houses, pay down their home loans and ultimately avoid foreclosure.
“Foreclosing doesn’t benefit anyone - not the borrower, not the lender, not the bond holder,” EMC President and CEO John Vella said.
On the other hand, recasting certain terms of the mortgage - lowering the monthly payments for a period, deferring unpaid principal and interest, or changing the rate - may allow delinquent borrowers to get past their financial issues.
What’s unusual about the Mod Squad is that rather than waiting for owners to contact EMC when they get in a jam, the team is reaching out to individual homeowners, working with local consumer credit counseling organizations, and holding loan modification educational meetings for borrowers in cities where delinquencies are rising.
Loan modification represents just one approach that mortgage servicers can use to stem the tide of foreclosures. Other techniques include:
- Repayment plans where unpaid balances are reduced over time through small, regular add-ons to borrowers’ monthly payments.
- Setting up a forbearance agreement whereby principal and interest payments are reduced or even suspended for a period of time, enabling the borrowers to get their finances under control. Then the regular payments resume, along with reimbursements of balances in arrears.
Remedies like this are more commonly available than many credit-strapped homeowners may be aware. In fact, Freddie Mac, Fannie Mae and FHA loan servicing companies to offer plans to delinquent customers who have a reasonable chance of avoiding foreclosure.
Such techniques could be a badly-needed, long-sought answer for payment-shocked subprime home loan borrowers who simply got in over their heads and mistimed the end of the boom.
SOURCE: Detroit Free Press