Subprime lenders and loan servicers are increasingly freezing or lowering interest rates for troubled California buyers even as foreclosures continue to skyrocket, according to the state Department of Corporations.
A June survey of 10 lenders that handle about half the state's riskiest home loans shows that nearly half the lifelines offered to borrowers included new interest rates. That's 14 percent more than earlier this year.
The state reported 28,395 loan modifications in the second quarter, a 46 percent rise from the first-quarter tally. Loan modifications, considered one of the most beneficial aids to borrowers, include freezing interest rates for up to five years or more and lowering scheduled reset rates.
All together, lenders made deals with nearly 64,000 struggling borrowers in the second quarter. Besides loan modifications, those deals included everything from adjusting payment schedules to agreeing to sell homes for less than what was owed.
State officials – and critics who say lenders still aren't offering enough help – call it encouraging. June was the highest month yet for modifications, said DOC spokesman Mark Leyes.
But that's where agreement ends. Though pleased by the rising numbers of modifications, consumer advocates say foreclosure is still the most likely result when borrowers fall behind on loan payments.
"While modifications are growing, they are not keeping pace with the growing number of defaults and foreclosures," said Paul Leonard, California director of the Center for Responsible Lending.
California had 23,528 foreclosures in June, according to DataQuick Information Systems. Since the beginning of 2007, the statewide foreclosure tally has reached nearly 200,000. More than 21,000 were in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties, according to DataQuick.
The company reported last month that 22 percent of troubled borrowers were escaping foreclosure.
Call The Bee's Jim Wasserman, (916) 321-1102. Read his real estate blog, Home Front, at www.sacbee.com/blogs.
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