Homeowners who have problems paying the mortgage continue to have a tough time getting lenders to come to their rescue.
And if lenders won't help homeowners with mortgage troubles, who will?
Since early this year, the California Reinvestment Coalition has been tracking the fates of homeowners who seek counseling for mortgage problems.
The latest report, "The Growing Chasm Between Words and Deeds," reveals things are getting worse.
In the report, 26 of 38 mortgage counseling agencies surveyed in December 2007 -- 72 percent of them -- said foreclosure was a very common outcome for clients who seek counseling.
That's a big leap from the 57 percent of counseling agencies that responded likewise in the original study, "The Chasm Between Words and Deeds," conducted four months earlier.
The coalition called the newest findings "shocking" amid reports that loan modification efforts like Hope Now and Project Lifeline are coming to the rescue with outreach efforts and loan modifications.
The study found, to the contrary, 91 percent of the counselors reported lenders were not making contact with borrowers before delinquency. And only 17 percent of the mortgage counselors said loan modifications were "very common."
When lenders did modify loans they did so only for one year with a fixed interest rate, according to the survey.
The survey's findings come at a time when more homeowners than ever are looking for help. In June, the California counseling agencies surveyed said they had more than 4,000 clients. In the latest study, the number had doubled to more than 8,000.
The study was conducted in California, but it has implications for the rest of the nation because major lenders make loans throughout the nation.
Other findings include 88 percent of counselors saying short sales were either "somewhat common" or "very common."
The CRC offered three pieces of advice each for lenders and policy makers.
For lenders:
- Streamline loan modifications with lower balances and lower, fixed interest rates for the life of the loan in order to keep homeowners in their homes.
- Return foreclosed properties to the community via nonprofit groups or public agencies to prevent the homes from falling into the hands of speculators and absentee investors.
- Give greater financial support to home loan counseling agencies and legal service providers on the front lines in the battle against foreclosures.
For policy makers:
- Legally mandate modifications and refinanced loans, finalize bankruptcy reform, prohibit foreclosures without loss mitigation options, and empower a federal agency to step in to purchase distressed home loans at a discount in order to refinance loans at a low, fixed rate.
- Pass stronger anti-predatory lending legislation to thwart conditions in the future mirroring today's dilemma. Hold investors and Wall Street firms liable for violations involving financing predatory loans.
- Provide real regulatory oversight. Regulators should scrutinize efforts of loan servicers to keep borrowers in their homes and publicize the results of that oversight. and make these exams available to the public. Several loan servicers that have signed on to the California Governor's Subprime Loan Agreement showed the poorest results in the latest survey.
