Hope Now, the consortium of banks, mortgage companies and credit counselors hoping to stem the housing crisis, released its August numbers. New foreclosure starts dropped by more than 25% to 224,000. The number of people who actually lost their homes in foreclosure sales was down 16% to 75,000.
Hope Now says the numbers show its program to workout loans is working. ”Our data suggests a correlation between the drop in foreclosures and the increase in work-out solutions to help at-risk borrowers,” said Faith Schwartz, the group’s executive director.
Look deeper into the numbers though. Repayment plans that merely give the borrower an opportunity to catch up on past due payments vastly outnumber loan modifications, where borrowers actually see their interest rates or principal reduced.
Loan modifications are viewed as a more permanent fix because they reduce the monthly payments. Presently repayment plans outnumber loan mods at Hope Now lenders by nearly three-to-one. And the gap is widening. In July the ratio of payment plans to load mods was closer to two-to-one.
If the economy comes back, many of the 3.2 million borrowers with payment plans may get caught up again. If not, they’ll just fall behind again. Hope Now, pay later.