In its fourth Analysis of Mortgage Servicing Performance, released
yesterday, the State Foreclosure Prevention Working Group cited
concerning trends and offered recommendations for action.

The report notes:

* Six of ten seriously delinquent borrowers are not even involved
in loss-mitigation efforts. The total number of struggling homeowners
not on track for any foreclosure prevention assistance continues to
grow. HAMP has helped slow down the foreclosure crisis, but current
efforts have been insufficient to get ahead of the foreclosure problem.
* Both loss mitigation and foreclosure efforts appear to be
backlogged. The average time to complete a loan modification for some
servicers is over six months.
* Most modifications result in payment reductions, but principal
reductions remain rare.
* Prime loans are increasingly driving the rising delinquency
rates.

The Working Group recommends:

* Servicers should suspend foreclosure proceedings on any loan
involved in the loss-mitigation process.
* Loss-mitigation programs must be improved to prioritize
principal reduction in areas of significant home price declines.
* Servicers should pay particular attention to reforming
payment-option ARM loans. If unaddressed, the payment shock on these
loans, coupled with the high proportion that are significantly
"underwater," will push a significant portion of payment-option ARM
loans into foreclosure.
* The HAMP program must increase transparency and reduce paperwork
in order to reach its potential.
* States should consider expanding homeowner counseling programs
or implementing temporary foreclosure mediation programs or other such
measures.
* Both servicers and Treasury should provide better options to
keep unemployed homeowners in their homes.

The State Foreclosure Prevention Working Group, which consists of 12
state attorneys general (AZ, CA, CO, FL, IL, IA, MA, NV, NC, OH, TX,
WA), bank regulators for NY, NC, and MD, and the Conference of State
Bank Supervisors, was founded in 2007 and has issued three prior reports
(all four reports can be found at http://www.csbs.org.)