FOR IMMEDIATE RELEASE
June 26, 2007
Contact: Kevin M. Mukri
OCC Releases Report Highlighting Best Practices Of Loan Servicers to Prevent Foreclosures
WASHINGTON — The Office of the Comptroller of the Currency (OCC) today published "Foreclosure Prevention: Improving Contact with Borrowers," an Insights report on best practices loan servicers are using to improve their contact rate with delinquent mortgage borrowers to help prevent foreclosures.
"One of the most significant factors we discovered was that early contact and communication with lenders and trusted advisors to develop alternatives to foreclosures increases the likelihood that troubled borrowers will find solutions that enable them to stay in their homes," said Comptroller of the Currency John C. Dugan.
Comptroller Dugan added that banks are recognizing that keeping homeowners in their homes is often the best way to mitigate credit losses, preserve customer relationships, and minimize the detrimental effects that foreclosed properties can have on communities.
"Effective foreclosure prevention strategies rely on increasing the amount of contact between loan servicers and delinquent borrowers," said Barry Wides, OCC's Deputy Comptroller for Community Affairs, "and the sooner this contact begins, the more likely it will be successful."
Many loan servicers are relying more on partnerships with interested third parties, and as a result, a growing number of nonprofit agencies are providing counseling services to at-risk homeowners in every state.
Once a servicer has made contact with the delinquent borrower, either directly or indirectly, there are a variety of options that allow borrowers to retain possession of their homes, or in situations where foreclosure is unavoidable, to reduce the financial hardship on the borrower and losses to the lender by selling the house.
The Insights report found three main strategies in use around the nation for reaching borrowers who are late on mortgage payments. The first two involve direct customer contact by the loan servicer or a nonprofit counseling agency. The third strategy depends on the delinquent borrower using a toll-free telephone number to call either the loan servicer or a housing counseling agency.
The OCC and the federal banking agencies are encouraging financial institutions to work with homeowners who are unable to make their mortgage payments. The agencies have stated that institutions will not face regulatory penalties if they pursue reasonable workout arrangements with borrowers.
"The rising number of subprime mortgage foreclosures has the potential to undermine the significant homeownership gains made over the past two decades," Comptroller Dugan said. "Prudent attempts to work out loans of homeowners who have defaulted on their contractual obligations are often in the best interests of both the lender and the borrower."
The Insights report can be accessed quickly by selecting "Community Affairs" on the OCC Internet home page and choosing "Publications and Resource Materials."
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