Mortgage Workouts by Industry Group Hit 239K

Washington, DC, Jan. 30, 2009--Mortgage companies modified a record 122,000 loans in December to try to avoid foreclosures, an industry group said Thursday.

In a separate report, Freddie Mac said Thursday that rates on 30-year mortgages edged down this week, but remained above 5%.

Hope Now, a coalition of mortgage servicers, lenders and counselors, said total "workouts," including negotiated payment plans designed to avert foreclosure, increased to a record 239,000 last month.

Modifications are permanent contract changes to lower payments.

Regulators and lawmakers have criticized industry foreclosure prevention efforts as too slow, or not effective, given reports that more than half the modifications were failing after six months.

Hope Now, an industry group that includes major lenders such as Wells Fargo and subprime loan servicers, said members will likely turn more to underwriting new mortgages with lower interest rates or principal, over the practice of setting new payment plans to stretch out costs.

"Hope Now expects that the increasing reliance on loan modifications rather than payment plans will continue as economic conditions warrant," the group said.

Data showing more prime borrowers than subprime borrowers were facing foreclosures in December underscored the urgency of foreclosure prevention. Total foreclosure starts rose 34,000 in December from November, 75% of which were prime loans, the group said.