Dees Stribling, Contributing Editor
McLean, Va.–Freddie Mac and 13 nonprofit organizations have created a pilot program to persuade delinquent borrowers to pursue mortgage workouts to help them steer clear of foreclosure. The new Borrower Help Centers in Chicago, Phoenix, San Bernardino and Washington, D.C., will provide free one-on-one “holistic” mortgage counseling to delinquent Freddie Mac borrowers. The GSE is also launching a separate Borrower Help Network offering similar counseling over the phone to Freddie Mac borrowers.
The programs aren’t limited to single-family homeowners, but will be offered to borrowers with Freddie Mac-owned mortgages on multifamily units. It’s the latest intervention in the market by government agencies or GSEs to prevent or at least forestall mortgage foreclosures, which have been having mixed success.
RealtyTrac, which follows residential foreclosures, noted that some 2.8 million properties saw a default notice, scheduled foreclosure auction or bank repossession in 2009. “As bad as the 2009 numbers are, they probably would have been worse if not for legislative and industry-related delays in processing delinquent loans,” said James J. Saccacio, CEO of RealtyTrac in a recent statement. “Monthly decreases [have been] driven primarily by short-term factors: trial loan modifications, state legislation extending the foreclosure process and an overwhelming volume of inventory clogging the foreclosure pipeline.”
But not every market has seen a dampening in foreclosure activity. A report on Thursday by the Arizona State University’s W.P. Carey School of Business noted that foreclosure activity in metro Phoenix–one of the areas hardest hit by the housing crisis, and one in which a Borrower Help Center has been set up–hasn’t slowed in the face of hiatus and mortgage-modification programs. In the condo/townhome segment of the market, foreclosures almost doubled in metro Phoenix between January 2009 and January 2010, helping drive the median price of a unit below $100,000, down from about $125,000 a year ago.
Thus any program, such as Freddie Mac’s, probably has its work cut out for it. Still, the GSE helped roughly 250,000 borrowers avoid foreclosure through loan modifications and other kinds of workouts plans last year. Currently, about 9 percent of all seriously delinquent mortgages in the United States are Freddie Mac-owned mortgages.
The new Freddie Mac effort will rely on established nonprofit organizations to contact and work with Freddie Mac borrowers who may be eligible for a modification but never called their lender or became frustrated or uncertain of the process and gave up trying. Organizations participating in the Borrower Help Center and Borrower Help Network include the National Urban League, HomeFree-USA, National Council of La Raza (NCLR), the local Neighborhood Housing Services in Chicago, Phoenix, and Ontario, California, and other local community organizations.
“Holistic” counseling goes beyond mortgage issues and also includes an assessment of borrower debt and credit issues that could affect his or her ability to stay current on a mortgage after a modification. Counselors at each Borrower Help Center review Freddie Mac and Making Home Affordable workout requirements with their clients, and also work with Home Retention Services, a subsidiary of Stewart Lender Services Inc., to help borrowers connect with their servicers.