Report: Gov't subprime rescue efforts fall short

By Chris Rizo | Apr 22, 2008

Terry Goddard

PHOENIX, Ariz. (Legal Newsline)-Government efforts to stem the tide of housing foreclosures are falling woefully short of what's needed, Arizona Attorney General Terry Goddard said Tuesday.

Goddard pointed to a new report by the State Foreclosure Prevention Working Group, a group of state attorneys general and banking regulators, to help make his point.

The report found that the "collective efforts of servicers and government officials to date have not translated into meaningful improvement in foreclosure prevention outcomes."

The report also found that the subprime servicing data for January 2008 are nearly unchanged from October 2007.

"In normal times, one would not expect a significant change in a four-month period," the report said. "However, this time period involved a dramatic increase in public attention to the subprime mortgage crisis."

Based on data provided by 13 of the 20 largest subprime lenders, which account for about 57 percent of the subprime mortgages, officials said seven out of 10 seriously delinquent borrowers remain in trouble despite efforts to help at-risk homebuyers.

"We continue to see a rising number of foreclosures in Arizona, which is a significant drag on Arizona's economy," Goddard said.

"This report confirms that efforts made by servicers to prevent unnecessary foreclosures are not enough. We need to explore additional approaches to prevent tens of thousands of unnecessary foreclosures in Arizona," he added.

The multi-state panel suggested that lenders, investors and state officials should work together to develop a systematic loan work-out system aimed at slowing the foreclosure process so fewer homebuyers will be forced from the homes.

The State Foreclosure Working Group has representatives of the attorneys general of 11 states: Arizona, California, Colorado, Iowa, Illinois, Massachusetts, Michigan, New York, North Carolina, Ohio and Texas.

The panel also has representatives from banking departments in New York and North Carolina, as well as from the Conference of State Bank Supervisors.

From Legal Newsline: Reach reporter Chris Rizo by e-mail at chrisrizo@legalnewsline.com.

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