<a href="http://www.ocregister.com/articles/loan-borrowers-credit-2049787-one-mortgage">Matt Padilla has a great article out today</a> on prime borrowers, option ARMs, and moronic understaffed loss mit departments.
<em>Experts say no one has tracked recent trends in loss mitigation nationwide among borrowers with good credit. But a taskforce of attorneys general analyzed the number of subprime borrowers getting help from their lender.
The taskforce's original study found that as of October 2007 about 70 percent of seriously delinquent subprime loans were not in any kind of workout with the lender.
An update to the study found that as of January 2008 little had changed. <strong>The update found that while loan servicers are doing more modifications, delinquencies are rising so quickly that the ratio of those not getting help remains the same: 7 out of 10 seriously delinquent loans are not in any kind of workout.</strong>
Some borrowers with good credit say it remains difficult and confusing to get a lender to cut a deal.
Deborah Wilmoth, of Rancho Santa Margarita, is struggling with an option adjustable-rate mortgage. She has been making the minimum payment, with deferred interest adding up each month. <strong>She refinanced in February 2006, and after more than two years of making minimum payments she now owes about $43,000 more to the bank than we she started, for a total of around $400,000.</strong>
"It's getting out of hand," Wilmoth said. "I don't want my credit to go bad."
Wilmoth, 53, a project management specialist for Boeing, said she paid a $495 fee to her lender Wachoviato temporarily lower her interest rate, but her monthly payments remained the same. For one year, she won't have as much deferred interest tacked onto her debt.
Beyond that, Wachovia hasn't helped, she said. Wilmoth has taken on a second job at a youth shelter to pay her first loan with Wachovia and a second mortgage for about $100,000 with Wells Fargo, she said.
She said Wachovia didn't explain how the option ARM loan would change over time if she kept making the minimum payment.
<strong>Wilmoth also blames herself. After buying her two-bedroom condo for $216,500 in 2000, she refinanced and took out a second mortgage to remodel it.
"I am not going to say I have this finance thing under control because I don't, which is why I am in this mess," Wilmoth said.</strong>
Aimee Worsley, a Wachovia spokesperson, said her company is working with Wilmoth, but can't comment beyond that out of respect for consumer privacy.
"We want to keep all of our borrowers in their home," Worsley said. "That is always our goal."
She added that Wachovia clearly explains each loan to consumers and it has long kept option ARM loans on its balance sheet. It does not sell them to Wall Street to turn into securities. (Wachovia became a big player in option ARMs after acquiring Golden West Financial Corp.in 2006.)
<strong>"We have a large stake in being careful during the underwriting and appraisal process and in ensuring that our customers have a thorough understanding of our product and payment options," Worsley said.</strong></em> <--- BULLSH*T!
<em>Wachovia's borrowers can get help even if they are current and that was true during the housing boom, she said. Current borrowers in trouble need to contact Wachovia's portfolio retention group while borrowers already delinquent should call loss mitigation, she said.</em>
At least Ms. Wilmoth blames herself for the HELOC abuse and lack of financial understanding. Matt does a good job reporting what IR has been writing about now for some time, and it is good to see the MSM allowing Matt to put together such a great and publicly needed article.
