Home loans made in the late summer and fall of 2006 produced substantially more defaults than loans made in preceding years, a new report by MDS DataQuick says. The San Jose Mercury-News reported April 24 that in California, the highest rate of defaults came between August and November of 2006. Loans made during that period defaulted at nearly twice the rate of 2005 mortgages and more than nine times the rate of those made in 2004, the report said. It also implicated certain lenders for their exceptionally high rates of default, and implicated the practice of "securitizing" mortgages for removing the risk to lenders and encouraging risky behavior.
According to the Mercury-News, more than 9 percent of mortgages made between August and November of 2006 ended up in default. By contrast, just 4.9 percent of California mortgages made in 2005 saw defaults, and the rate for 2004 was less than 1 percent. Meanwhile, mortgage lenders with the highest rates of default were seeing default rates as high as 70 percent of their clients. The three lenders with the highest defaults were all small lenders, DataQuick said: ResMAE Mortgage, at 70 percent; Master Financial, at 65 percent; and Ownit Mortgage Solutions, just behind at 64 percent. Among major lenders IndyMac Bank had the highest default rate at 18 percent. Of these four companies, only ResMAE is still operating.
The Mercury-News says, and our Fullerton mortgage loan modification attorneys agree, that the report makes a strong case that more regulation in the mortgage lending industry is needed. The period when the bad loans peaked occurred in the same year when the most mortgages were "securitized," the report said. By selling the risk and potential profit of mortgages to investors, lenders essentially removed their own risk. This freed them to extend more credit to risky borrowers, using subprime loans that maximized their profit while passing the risk on to investors. The result, as we now know, was the collapse of the housing market when too many of those risky borrowers couldn't make their mortgage payments. It also made it difficult for borrowers to change the terms of their loans, thanks to investors who can't or won't give permission for otherwise viable loan modifications.
At Howard Law LLP, much of our practice is now dedicated to helping clients who face default because of these conditions. Our Westminster loan modification lawyers negotiate with lenders on behalf of clients who believe they can continue their mortgage payments if the bank will agree to a substantial change in the terms of their loans. Using common sense and any evidence of predatory lending or illegal behavior by the banks, we have successfully changed our clients' interest rates, payment structures and repayment periods. Our goal is to keep our clients in their homes for the long term by establishing a new, achievable monthly mortgage payment.
If you're at risk of default -- or already in it -- and you need help convincing a lender to modify your mortgage, Howard Law can help. To speak confidentially to our Garden Grove loan modification attorneys at a free consultation, please contact us today via email or call 1-800-872-5925.