Realty Check

Subprime Anniversary: Hard To Tell Just Where We Are


One year ago today, HSBC announced its first writedown relating to subprime mortgages. So one year later, you have to ask, where are we in the process of saving subprime borrowers? Answer: damned if I know!

I set out this morning to get some stats on which programs are helping whom, and here’s what I found:

HOPE NOW (The Treasury-backed initiative that brought lenders together to try to communicate better with their borrowers in order to work out troubled loans): According to the Financial Services Roundtable, Hope Now helped 869,000 borrowers, prime and subprime refinance or modify existing loans. They admit that not all of those borrowers were actually delinquent on their loans, so it’s not all folks facing foreclosure.

TEASER-FREEZER (The Paulson plan that freezes certain subprime loans at their initial teaser rate for five years. Many major lenders have signed on): Treasury officials tell me that it really isn’t totally up to speed yet, so no data there.

FHA SECURE (The Administration plan to expand the FHA program to delinquent borrowers who were current until their loans reset): HUD officials (HUD is FHA) tell me 86,000 families “who are current or past due on their home loans” have refinanced with FHA since the plan was announced in August. I asked them to tell me which of those are just folks who decided to refi and which were actually delinquent, and they so far won’t say. However, a member of the American Securitization Forum told a conference this week that FHA is not working and that only 5 percent of delinquent subprime borrowers even meet the FHA requirements.

STATE FORECLOSURE PREVENTION WORKING GROUP (A group of state attorneys general and state banking regulators formed this group in the summer of 2007): This week they report 7 out of 10 seriously delinquent borrowers are not on track for any loss mitigation option. However, servicers have increased their use of loan modifications and other home retention options.

The Mortgage Bankers Association comes out with its quarterly delinquency survey next month for Q4 2007. I’m waiting for that.

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