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Delinquent borrowers unaware of workout options
McLEAN, Va. (2/1/08)--Fifty-seven percent of late-paying borrowers in the U.S. still don't know their lenders may offer alternatives to help them avoid foreclosure, reports a new study. However, that is a slight improvement over 61% who were in the same study in 2005. The survey is from Roper Public Affairs and Media, a market research firm, and residential mortgage giant Freddie Mac. Freddie Mac is a CUNA Strategic Services provider in the secondary mortgage area. While the results may reflect some of credit unions' efforts at reaching members and helping them, the survey didn't address credit unions' efforts specifically. However, the results point to the need for financial literacy--a topic dear to credit unions' hearts. And awareness of the national HOPE hotline--which credit unions are involved in promoting--is increasing. The survey also found an increase in the percentages of delinquent borrowers who recall their lenders reaching out to them (86%) and who in turn reached out to their lender (75%) to discuss workout options. And the percentage of delinquent borrowers aware of housing counselors they can talk to about their mortgage increased to 44% from 36%. Awareness rose when specific mortgage-management options were mentioned. When prompted, delinquent borrowers said they knew about repayment plans (63%), modifying an adjustable-rate mortgage into a fixed-rate loan (68%), and paying off their mortgage in a single lump sum (78%). Of those surveyed, 86% were aware of their lender's effort to contact them, compared with 75% in 2005. Borrowers who contacted their lenders also increased, to 75% from 68%. In the 2007 survey, borrowers looking for information about mortgage management and avoiding default shifted where they went for information from traditional sources--financial institutions and mortgage lenders--to the Internet, family or friends. Roughly 25% selected the Internet as their first mortgage-information choice--nearly double the 13% who did so two years earlier. The survey found that the need for borrower education programs cut across racial, ethnic and gender lines, underscoring the need for financial literacy programs. The survey asked about borrowers' awareness of the national public awareness campaign aimed at encouraging borrowers to call the HOPE hotline at 888-995-HOPE. Freddie Mac works with a coalition of organizations on the campaign. Many credit unions are involved in promoting the HOPE campaign. For example, Paul Kundert, president/CEO of UW CU, Madison, Wis., joined the Wisconsin Housing and Economic Development Authority (WHEDA) Tuesday in a press conference to raise the profile of the hotline. The credit union will assess borrowers' circumstances to find if those with high-cost subprime loans qualify for a conventional mortgage under an FHASecure program of the Federal Housing Administration. UW CU doesn't make subprime loans, but as a WHEDA lender, "we thought we should step forward and try to be of value to consumers." Freddie Mac helps an average 1,000 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. For more information on the survey and for sources credit unions can use to help their members through the mortgage crisis, use the links.
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