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Published: November 2008

Survey reveals California homeowners not being helped as promised

Coalition: Mortgage

The California Reinvestment Coalition, of which Consumer Action is a member, has released a report on its survey of California mortgage counseling agencies, which found that despite lenders' promises to help borrowers, foreclosure is still the most common outcome for homeowners struggling to make mortgage payments.

Click here to download the report -The Continuing Chasm Between Words and Deeds III

Below is a summarized excerpt from the report:

California mortgage counseling agencies that responded to the survey confirm more could have been done to keep families in their homes. They reported:

• Lenders are not responsive.
Agencies were asked if servicers consistently modify loans by fixing interest rates for the life of the loan and all groups responded that the industry as a whole is not consistently modifying loans for long-term affordability. No group reported that the industry as a whole was modifying loans for the long term. 

• Borrowers are experiencing devastating outcomes.
Counseling agencies were asked how common different loss mitigation outcomes were for their borrowers. Despite a reported increase in servicer willingness to offer loan modifications, the responses to this critical question were as bleak as those a few months ago. A shocking 26 groups, or 68.4% of those surveyed, said that foreclosures are a very common outcome for their clients. 

• Outreach to borrowers in trouble is generally poor.
Despite lenders’ assertions about reaching out to borrowers BEFORE they face problems from rising interest rates and higher monthly payments, most counseling and legal service agencies do not see this happening. Only 30% of groups surveyed reported that the industry as a whole was conducting outreach to borrowers before rates reset. 

• The vast majority of loans should not have been made.
A shocking 90% of respondents reported it was  “very common” for their clients to have received loans that were unaffordable to them at the time the loan was made. 

• Industry fraud and abuse of immigrants are substantial concerns.
Nearly 60% of responding groups reported that non-English speakers were sold loans in their native language, but provided English-only documents. This is a recipe for abuse, and flies in the face of California state law requiring translation of certain documents in certain transactions. Similarly, 55% of groups surveyed cited lender/broker abuse as a very common problem. 

• Principal write downs are not happening.
Many borrowers now owe more than their homes are worth, making it impossible for them to refinance into a new loan. These borrowers need for their loan servicers to reduce or write down the amount of money owed to be in line with the home's value. While 44.5% of counselors reported that this solution would have helped their clients, none of the groups reported that loan servicers were commonly offering principal reductions. Only two groups said it was a somewhat common occurrence. 

• Tenants are being impacted.
Perhaps the most compelling victims of all in the foreclosure crisis are tenants living in non-owner occupied housing. Often tenants will pay their rent one day, only to find soon thereafter that the property has been foreclosed upon, and they are being forced to leave. A majority of surveyed agencies (57.9%) said that tenants are a somewhat common presence in properties they are trying to save.

Lead Organization

California Reinvestment Coalition

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