More aid for borrowers, but foreclosures up, too

September 10, 2008

California mortgage lenders completed deals with 26,358 struggling borrowers in July, modifying nearly half the loans to prevent foreclosure, the state Department of Corporations reported Tuesday.

The department's newest statistics for 10 lenders that report to the state showed 12,657 loan modifications in July. That was up almost 17 percent from June and more than double the number in January.

Loan modifications typically involve freezing or lowering interest rates to help borrowers make monthly payments. Many experts consider modifications the best means of keeping borrowers in their homes.

Yet the 14,666 foreclosures in July, as reported by the same 10 lenders, continued to outpace loan modifications.

The lenders are part of a 2007 agreement with Gov. Arnold Schwarzenegger to help buyers avoid foreclosure. They account for about half the state's subprime loans.

Altogether, 48 percent of borrowers who received workouts got their loan terms modified. Nearly 13 percent refinanced into new loans and about 9 percent were approved for short sales. That's where lenders agree to take less than owed on the mortgage to avoid the higher cost of foreclosure.

Lenders reported opening 77,876 new workout cases in July. Statistics show 68 percent of those cases involved subprime borrowers with spotty credit histories.