Delinquent Borrowers: 57% Unaware of Workout Options, Says New Freddie Mac/Roper Survey

20 octobre 2021 Pierre Perrin-Monlouis

Foreclosure Avoidance Awareness Largely Unaffected by Market Problems

McLean, VA – Despite a surge in news reports about mortgage delinquencies, foreclosure rates and loan modifications, 57 percent of the nation’s late-paying borrowers still don’t know their lenders may offer alternatives to help them avoid foreclosure, says a new survey from Roper Public Affairs and Media – a leading international market research firm, and Freddie Mac (NYSE:FRE) one of the nation’s largest purchasers in residential mortgages.

That represents a slight improvement from 2005 when the first Freddie Mac/Roper borrower survey found 61 percent of delinquent borrowers didn’t know their mortgage lender offered workout options. The survey [PDF 79K] also found an increase in the percentages of delinquent borrowers who recall their lenders reaching out to them (86 percent) and who in turn reached out to their lender (75 percent) to discuss workout options.

The new Freddie Mac/Roper poll also says the percentage of delinquent borrowers aware there are housing counselors they can talk to about their mortgage has increased from 36 percent in 2005 to 44 percent today.

“This new survey shows efforts to get borrowers to call counselors are starting to work, but that too many at-risk borrowers are still unaware their servicers routinely provide alternatives that can help them stay in their homes,” said Ingrid Beckles, Freddie Mac’s Vice President of Servicing and Asset Management. “This fact underscores the importance of convincing borrowers to pick up the phone, call their servicer, and find out whether they can avoid foreclosure.” Servicers are firms that collect monthly mortgage payments on behalf of investors such as Freddie Mac.

By working with servicers, Freddie Mac now helps an average of 1000 troubled borrowers a week avoid foreclosure through forbearances (which can delay or reduce payments), repayment plans, loan modifications (that restructure payment terms) or other workout options. (Borrowers can find a comprehensive description of workout options at the Avoiding Foreclosure page of the Freddie Mac website.)

“One problem is that servicers are unable to contact borrowers in more than half of the foreclosures we see at Freddie Mac,” said Beckles. “That’s why it is imperative to closely track borrower awareness of workout options so the industry and the government can evaluate and enhance their efforts to get more borrowers talking to their servicers about avoiding foreclosure.”

In addition to finding that 57 percent of delinquent borrowers were unaware of their workout options, the new survey found awareness increased when some specific options were mentioned. For example, delinquent borrowers, when prompted, said they knew about repayment plans (63 percent), modifying an adjustable rate mortgage into a fixed rate loan (68 percent) and paying off their mortgage in a single lump sum (78 percent).

The survey also found 54 percent knew missed payments could be added to the loan balance through a loan modification and 52 percent knew mortgage terms could be extended under some circumstances. The survey also finds that only 43 percent are aware of forbearances or a temporary suspension of the mortgage payment or deed-in lieu of foreclosure (41 percent).

The Freddie Mac/Roper survey found that the need for borrower education programs cuts across racial, ethnic and gender lines, underscoring the need for financial literacy programs like Freddie Mac’s CreditSmart®, CreditSmart® Español, and CreditSmart® Asian programs.

“The survey finds that people who are behind in their mortgage payments are in many ways just like all other homeowners,” said Dr. Christopher Fleury, a Senior Research Director at Roper. “Even though they have fallen behind in their mortgage payments, they, too, almost unanimously recognize the importance of having a good credit rating, of paying their bills on time, and of saving money each month.”

Why Some Borrowers Don’t Contact Servicers

On the positive side, 86 percent of delinquent borrowers reported awareness of their lender’s effort to contact them in the new survey compared to 75 percent in 2005, and the percentage of borrowers who actually contacted their lenders also increased, from 68 to 75 percent, during the same period. A majority (59 percent) of delinquent borrowers said their contact with their servicers was helpful although one in four said the experience was “intimidating” or “confusing”.

One in four delinquent borrowers chose not to accept their lender’s invitation to discuss workout options. But, the percentage that said they believed there was no reason to call or nothing the servicer could do to help fell from 48 percent in 2005 to just 33 percent in 2007. On the other hand, the percentage that chose not to call because they said they didn’t have enough money to make a payment rose from 7 percent to 16 percent and the percentage who denied they were having trouble making their payment doubled from six to 12 percent.

When asked to suggest how servicers could make communication easier, answers given by delinquent borrowers included eliminating automated phone systems (8 percent), providing more specific information (10 percent) and speaking to a live person (14 percent).

Internet, Family/Friends Gain as Mortgage Information Sources

When it comes to looking for information about managing mortgages and avoiding default, the 2007 survey found a slight shift from traditional information sources – like financial institutions and mortgage lenders – to other sources such as the Internet and family or friends.

Specifically, one-in-four delinquent borrowers (25 percent) selected the Internet as their first choice for mortgage information, almost twice as many as in 2005 (13 percent). The percentage consulting their families and friends also doubled to 14 percent in 2007 from eight percent in 2005. The percentage of delinquent borrowers turning to credit and debit counselors rose marginally from five percent to eight percent over the same period.

Nevertheless, six out of ten delinquent and current borrowers in the 2007 survey said their first stop for mortgage default information would be a bank or mortgage lender, virtually unchanged from 2005.

At the same time, the survey found delinquent borrowers conflicted about their lenders, with significant percentages saying financial institutions and similar financial institutions are a hassle to deal with (83 percent) and don’t want to work with people who are struggling financially (73 percent). On the other hand, clear majorities also said they feel comfortable contacting their lenders (77 percent) and believe their lenders treat them fairly (84 percent) and provide helpful information on a variety of financial matters (81 percent).

“The survey results show that many borrowers have ambiguous feelings about financial institutions in general,” Fleury said, “although homeowners tend to be more positive about their own bank.”

“HOPE hotline is working”
The survey also asked borrowers about their awareness of a national public awareness campaign aimed at encouraging borrowers to call the HOPE hotline at 888-995-HOPE. The Ad Council, NeighborWorks America, the Homeownership Preservation Foundation (HPF), Freddie Mac and a coalition of mortgage investors and lenders originally launched the campaign in June 2007 to drive calls to HPF’s HOPE Hotline.

According to the survey, nearly one in four delinquent borrowers (23 percent) report seeing the ads and one in ten (9 percent) who are aware of the HOPE Hotline have made the call. HPF says the toll-free number now receives between 1500 and 3000 calls per day, up from 250 per day one year ago. More than 200,000 homeowners have called the hotline since June 25 of last year, according to HPF.

“The public service campaign is working,” said Ken Wade, CEO of NeighborWorks(R) America. “Every day, through our partnership with the Homeownership Preservation Foundation, we’re helping thousands of homeowners in financial stress take steps to prevent foreclosure with the 888-995-HOPE hotline. Moreover, those homeowners who call and need additional counseling are being referred to local NeighborWorks organizations for one-on-one, face-to-face foreclosure prevention counseling.”

“We’re pleased that so many more people know about the HOPE Hotline and the assistance we offer,” said Colleen Hernandez, President and Executive Director of Homeownership Preservation Foundation. “Homeowners need to know that they’re not facing this issue alone. Contacting their mortgage company or a trusted resource like the HOPE Hotline is the first step to avoiding foreclosure. Help is available.”

The 2007 Freddie Mac/Roper survey results are based on responses from 2411 adult homeowners, including 1,004 delinquent borrowers more than one month late. Roper conducted the survey by telephone from October 23 through November 14. The survey has a three percent margin of error.

Freddie Mac is a stockholder-owned corporation established by Congress in 1970 to support homeownership and rental housing. Freddie Mac purchases single-family and multifamily residential mortgage and mortgage-related securities, which it finances primarily by issuing mortgage-related securities and debt instruments in the capital markets. Over the years, Freddie Mac has made home possible more than 50 million times, ensuring financing for one in six homebuyers and more than four million renters.

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