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State Officials: Loan Modifications Take Too Long
January 25, 2010
On average, it takes more than six months to complete a loan modification, which is "unacceptable," according to the State Foreclosure Prevention Working Group.The group, which includes state attorney generals and banking lawyers, notes in its fourth-quarter report that servicers have steadily increased the number of employees dedicated to loss mitigation.
The report says that, on average, one full-time employee is handling 133 modification cases, down from 246 cases back in June.
"However, the increase in loss mitigation staff has not prevented an increase in the backlog of loss mitigation resolutions," the January report says.
State officials point out that the ratio of modifications "in process" to completed modifications has "ballooned" from 3-to-1 in October 2008 to 7-to-1 in October 2009.
The working group is concerned that 72% of completed modifications result in an increase in the principal amount of the mortgage.
"Servicers routinely capitalize delinquent interest, corporate advances, escrow advances and attorney fees and other foreclosure-related fees and expenses into the loan balance when completing a loan modification," the report says.
With so many underwater mortgages, increasing the loan balance "only adds to the likelihood of ultimate default."
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